Cathie Wood bought Netflix stock on the drawdown after the report. Should we follow her lead

The head of exchange-traded funds Ark Invest Cathie Wood took advantage of the collapse of shares of streaming giant Netflix after the disappointing report and bought the company's securities for about 17.5 million. On Wednesday, Netflix reported mixed results for the third quarter, after which its quotes collapsed by 10%. Wall Street analysts took the report calmly: among them there were those who considered the market reaction excessive and also recommended to buy the company's shares on the decline. But there are also more cautious opinions.

Cathie Wood's Ark Invest bought 15,756 shares of Netflix stock worth about $17.5 million on October 22, Seeking Alpha reports. The purchase was made through the Ark Next Generation Internet ETF, one of Wood's actively managed exchange-traded funds that invests in innovative and digital companies. The deal came after Netflix shares fell 10% on Wednesday amid a disappointing third-quarter report, which Ark took as an opportunity to enter, the publication believes.

Prior to this purchase Ark and its exchange-traded funds did not own shares of Netflix, Seeking Alpha specifies. After the deal, the securities of the streaming service took 40th place in the fund's portfolio of 49 assets. Although the position is small compared to the fund's core investments - its weight in it amounted to 0.77% - this move indicates Cathie Wood's confidence in the long-term potential of the streaming video industry, despite the current market fluctuations, explains Seeking Alpha.

In trading on October 23, Netflix shares fell by 0.3%. At the same time, since the beginning of the year - even taking into account the sell-off after the publication of quarterly results - the company's market capitalization has grown by almost 30%.

Although investors sold off Netflix shares after the report, which showed lower-than-expected profits and operating margin, analysts took it calmly. None of those who advised to buy securities of the company, did not abandon this recommendation - most of them kept neutral or moderately optimistic estimates, notes CNBC. Wall Street analysts considered that the company's results for the third quarter do not cause serious cause for concern, emphasizes Benzinga. According to them, the main driver of Netflix's future growth remains the rapid development of advertising direction.

Canaccord analyst Maria Ripps, for example, also thought that the fall in Netflix shares should be seen as a buying opportunity. She said the more important indicators in the report were record audience engagement and growth in Netflix's advertising revenue. "Netflix benefited from a particularly successful content lineup, achieving record viewing shares in the U.S. and U.K.," Ripps said. She added that the outlook for the fourth quarter looks solid, and the drop in quotes was probably an overreaction by the market.

Bernstein analyst Laurent Yun reiterated an Outperform rating (above market) for Netflix stock and a target price of $1390, suggesting a 25% upside potential. He, too, noted that a 10% drop in the stock price after the report was unnecessary. According to Yun, the company's content lineup in the fourth quarter "could be the best in history." The analyst recalled that Netflix has already experienced short-term collapses in quotes after the publication of reports, but each time quickly recovered due to strong fundamentals. "History rewards patient investors, and we expect the same now," he said

Overall, about 70% of analysts tracking the streaming giant's stock are advised to buy. 27% are neutral with a rating, and only two analysts suggest selling these securities. Wall Street's average target price of $1366 per share suggests Netflix's market value is up about 22% from the last close.

Some analysts, however, took a more cautious stance. For example, Eric Sheridan of Goldman Sachs noted that Netflix's lack of a detailed forecast for 2026 could be considered a negative. "Any concerns affecting stock performance will focus on how Netflix holds the attention of its audience compared to its competitors," Sheridan explained in a note quoted by Benzinga. However, he added that Netflix still has room to expand its operating margin and revenue should grow at double-digit rates in the future.

JPMorgan analyst Doug Enmuth after the report lowered the target price of the company's shares - from $1300 to $1275. At the same time, the new target implies growth of Netflix quotes by about 15%. The results for the third quarter and the forecast for the fourth quarter were "generally solid," but without the previous growth margin, Enmuth said.

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