Netflix at $68: Buy the Dip or a Stock Being Re-Rated for Good?

Assessment as of October 2, 2026, before the September employment report's 8:30 a.m. ET release. Calculations use the October 1 close of $67.85 (StockAnalysis). The employment release and subsequent trading are excluded.

The Short Answer

Netflix is much cheaper than it was at its 2025 peak, but the decline alone does not make it a bargain. At $67.85, the stock trades at 18.9 times the published 2026 EPS forecast and 17.8 times the 2027 forecast. Whether those figures capture recurring earnings needs care: a large Warner Bros. termination fee boosted this year's profit and cash flow.

Existing holders: hold. For new investors, a small starter position at $67.85 is reasonable; I would wait for October 20 guidance before adding materially. A full position needs stronger evidence that revenue growth can stabilize and Netflix can defend engagement.

Wall Street's disagreement is about valuation versus engagement: Deutsche Bank sees room for growth, while Wells Fargo worries about weaker viewing.

Key Takeaways

• Netflix closed at $67.85 on October 1, about 49% below its June 30, 2025 record close of $133.91.
• The Street is still bullish: 34 of 51 analysts rate it Buy or Strong Buy, 16 Hold and one Strong Sell. The average target is $92.82 (StockAnalysis, Oct. 1).
• The quoted valuation is 18.9x 2026 forecast EPS and 17.8x 2027 forecast EPS. A fee-adjusted 2026 scenario gives about 22.1x, but only if the published forecast still includes the fee. The calculation below makes that assumption explicit.
• The guided 4.4% free-cash-flow yield includes the termination fee's cash benefit. It should not be treated as a recurring yield.
• The bear case comes from engagement data. YouTube reached a record 14.2% of U.S. TV viewing in July, against 7.8% for Netflix (TheWrap, citing Nielsen via HSBC).

Four Valuation Phases in Four and a Half Years

Netflix's chart shows four distinct regimes, a pattern we also traced at Micron. In each one, investors were paying for something different.

Phase	Period	Split-adjusted price	What investors were paying for
1. Subscriber shock	Apr.–Dec. 2022	$22.62 on Apr. 20; fell further to ~$16 in May	Doubts about subscriber growth and streaming economics
2. Re-rating	2023–Apr. 2025	~$109.69 close on Apr. 24, 2025	Paid sharing, ad tier, margin expansion
3. Peak optimism	May–Jun. 2025, peaking Jun. 30	$133.91 close (~40x forward, per Deutsche Bank)	Sustained growth and execution priced in
4. Derating	Jul. 2025–Oct. 2026	$67.85 (18.9x 2026E / 17.8x 2027E consensus)	Slowing growth, M&A doubts, engagement risk

1. Subscriber shock: the 2022 collapse

On April 20, 2022, Netflix fell 35% in one session to $226.19 ($22.62 split-adjusted) after reporting its first subscriber loss since 2011 and forecasting the loss of 2 million more (BNN Bloomberg). That was the crash-day close, not the bottom: shares reached an intraday low of $162.71, or $16.27 split-adjusted, in May (Forbes). Buying the initial drop still meant enduring substantial further losses.

2. Re-rating: from subscriber counts to monetization

Netflix answered with paid sharing and an ad-supported tier, then expanded operating margins. The investment case shifted toward earning more from its audience. On April 24, 2025, shares touched $1,101 intraday and closed at $1,096.87, equivalent to $110.10 and $109.69 after the later split (TheWrap).

3. Peak optimism: June 2025

The advance continued through May and June, reaching a record split-adjusted close of $133.91 on June 30 (KlickAnalytics historical prices). Deutsche Bank puts the valuation around that peak at roughly 40 times forward earnings (Investing.com via Yahoo Finance). That left little room for growth to disappoint.

4. Derating: a run of disappointments

The slowdown arrived as a series of disappointments rather than one collapse:

• The Warner Bros. detour. In December 2025, Netflix agreed to buy Warner Bros.' studios and HBO Max. On February 27, 2026, Warner Bros. Discovery walked away for Paramount Skydance's $31-per-share offer, and Netflix collected a $2.8 billion termination fee (CNBC). The deal never closed, but it showed investors that management was willing to make a very large acquisition.
• April's guidance disappointment. Shares fell roughly 9–10% following the April 16 first-quarter report. The board authorized another $25 billion of buybacks on April 22 (The Next Web).
• June's 17% drop. Reed Hastings left the board, reports said Netflix had bid for Roku and looked at Lionsgate, and M Science flagged the weakest subscriber additions since 2022 (Motley Fool).
• July's second reset. After second-quarter results on July 16, shares fell 8% after hours as third-quarter guidance of $12.86 billion in revenue and $0.82 of EPS missed estimates (TheWrap).
• September's engagement downgrades. Wells Fargo's Steven Cahall cut the stock to Underweight on September 18. He cited daily viewing of about 1.6 hours per subscriber in the first half, roughly 8% below 2023 levels, and projected 21% fewer hours from the top 100 originals in the second half (TIKR). HSBC followed on September 22, cutting to Hold with a $76 target (TheWrap).

The stock is now slightly below its November 17, 2021 closing high of $69.17 split-adjusted (Dow Jones Market Data via MarketScreener). Meanwhile, revenue rose from $29.7 billion in 2021 to a guided 2026 midpoint of $51.2 billion: about 72% growth. A larger business has not guaranteed a higher share price.

The Fundamentals Are Slowing, Not Failing

Second-quarter revenue rose 13.4% to $12.56 billion, with a 33.4% operating margin. Netflix also repurchased $4.7 billion of stock and ended the quarter with $27.1 billion of authorization remaining (Netflix Q2 Form 10-Q). Our buyback explainer explains how repurchase prices affect shareholder value.

Management's full-year outlook calls for $51.0–$51.4 billion of revenue, a 31.5% operating margin and about $3 billion of advertising revenue. But revenue growth slowed from 17.6% in Q4 2025 to 16.2% in Q1 and 13.4% in Q2. Third-quarter revenue guidance of $12.86 billion implies roughly 11.7% growth against $11.51 billion a year earlier (Netflix Q2 shareholder letter).

Engagement also needs context. Total viewing hours rose 2% in the first half, versus 1.5% growth in 2025, according to the same letter. That is modest improvement in aggregate viewing; it does not disprove analysts' concerns about viewing per subscriber. The measures have different denominators. Netflix also plans to publish its viewing-hours report annually starting in early 2027, so investors should not assume October's earnings will include a fresh comprehensive viewing report.

What the Valuation Actually Says

Start with the published estimates. StockAnalysis lists 2026 EPS of $3.59 and 2027 EPS of $3.81, but labels its EPS series non-GAAP adjusted. Its public table does not reconcile the termination fee's treatment. Subtracting the fee without establishing that it remains in the estimate could remove it twice.

The fee itself is clearer. Netflix's Q1 accounts show $2.8 billion of termination income, 4.298 billion diluted shares, $6.547 billion of pretax income and $1.264 billion of income-tax expense. The fee divided by shares is about $0.65 before tax. Applying the quarter's 19.3% effective tax rate gives an illustrative after-tax contribution of about $0.53 per share (Netflix Q1 shareholder letter, financial statements).

Earnings basis	EPS used	P/E at $67.85	P/E at $57
Published 2026 consensus	$3.59	18.9x	15.9x
Illustrative 2026 scenario, only if consensus includes the fee	~$3.06	22.1x	18.6x
Published 2027 consensus	$3.81	17.8x	15.0x

The conditional scenario is $3.59 − [$2.8B × (1 − 19.3%) / 4.298B shares] ≈ $3.06. It uses Q1's tax rate and share count as proxies; it is not company guidance or a confirmed reconciliation of consensus EPS. It removes only the fee and does not reverse transaction expenses. The defensible claim is that quoted multiples have fallen sharply; a precise recurring-earnings multiple remains unconfirmed.

Our Netflix valuation page tracks forward earnings against peers. As our forward P/E explainer discusses, comparisons need a consistent forecast period and earnings definition. Calendar-year 2027 EPS and a rolling forward estimate are not interchangeable.

Cash flow needs the same care. Guided 2026 FCF of $12.5 billion divided by $282.52 billion of market capitalization gives 4.4%, including the fee's cash benefit. The denominator comes from StockAnalysis's October 2 snapshot, displaying the October 1 close and approximately 4.16 billion shares outstanding. This point-in-time share count differs from the Q1 weighted-average diluted count used in the EPS calculation.

Netflix raised its FCF forecast from $11 billion primarily because of the fee's after-tax effect (Q1 shareholder letter, cash-flow discussion). The earlier $11 billion is not an updated forecast excluding the fee, and the $1.5 billion increase is not a precise reconciliation of its cash contribution. Recurring cash generation needs to support the valuation after this windfall passes.

The Street: Buy Ratings, Lower Conviction

Source	Rating mix	Price targets
S&P Global via StockAnalysis (Oct. 1 snapshot)	27 Strong Buy, 7 Buy, 16 Hold, 0 Sell, 1 Strong Sell	Average $92.82; low $57; high $135
Deutsche Bank (Sept. 29)	Upgraded to Buy	Cut from $100 to $95
HSBC (Sept. 22)	Downgraded to Hold	Cut from $96 to $76
Wells Fargo (Sept. 18)	Downgraded to Underweight	Cut from $80 to $57

The consensus label is still Buy, but the recent target cuts show less conviction. The average target implies about 37% upside; it may also lag a deteriorating earnings outlook.

Today's Macro Backdrop Does Not Help

The Federal Reserve raised its target range to 3.75%–4.00% on September 16 (FOMC statement). In his October 1 speech, Vice Chair Philip Jefferson said inflation had stayed too high for too long and highlighted energy-related risks (Federal Reserve).

The 10-year Treasury yield reached 5.342% intraday on October 1, its highest since 2002 (Reuters via Investing.com). That exceeds Netflix's guided FCF yield, even including the fee. The measures are not equivalent: FCF yield is neither a promised shareholder payment nor a fixed return. The comparison does show why expectations for future growth matter when bonds offer a higher starting yield.

For Netflix, sustained inflation could pressure household subscriptions and advertisers' budgets. Its relatively inexpensive entertainment offering may help retention, but that is a reason to watch customer behavior, not assume resilience. Our inflation and Fed guide explains how rates affect equity valuations.

When the Dip Becomes a Buy

Netflix will release third-quarter results on October 20. These are the signals I would watch:

• Engagement: Does management address viewing per subscriber, retention and YouTube's share gains with useful evidence? A new comprehensive hours report is not scheduled for this release.
• Fourth-quarter guidance: Does revenue growth stabilize near 11–12%, or keep falling? A guide below 10% would support the bear case.
• Advertising: Is the company on track for about $3 billion of 2026 ad revenue? This is the clearest new growth engine.
• Capital allocation: Continued buybacks at these prices, with no large acquisition, would help the Buy case.

For a three-to-five-year investment, I would add beyond a starter position only if October's guidance and engagement evidence support durable growth. At $57, the valuation would be more attractive: 15.9x published 2026 EPS, or 18.6x in the conditional fee-adjusted scenario. Those multiples also depend on earnings estimates holding up.

A 49% fall makes Netflix worth examining. A larger commitment needs confidence in what the business can earn repeatedly, not just how far the share price has fallen.

---

General investment analysis, not personalized financial advice. Historical prices are adjusted for Netflix's November 2025 10-for-1 split. Price declines, revenue growth, P/E ratios and FCF yield are the author's calculations from cited data. The fee-adjusted EPS scenario is illustrative and depends on whether consensus includes the fee; its tax and share-count assumptions are stated above. Forecast and analyst snapshots refer to October 1, 2026; linked data pages may subsequently change.