Netflix's market capitalization has fallen by $260 billion over the past year. Should you buy shares before the earnings report?

Netflix shares have been among the market’s underperformers over the past year. They are under pressure due to concerns about the streaming giant’s prospects amid media market consolidation and intensifying competition. Investors expect that the quarterly earnings report, which will be released after the market closes on July 16, will only confirm these risks, according to Bloomberg.

Since reaching an all-time high on June 30, 2025, Netflix’s stock has fallen by approximately 45%. This has made the stock one of the 20 worst-performing stocks in the S&P 500 and resulted in a loss of $257 billion in market value.

The decline accelerated after initial reports that the streaming giant was planning to acquire Warner Bros. Discovery—a deal it ultimately lost to Paramount Skydance. Explaining the need for this acquisition, Netflix said it was facing fierce competition amid a vast selection of content available to viewers.

Since mid-April, when the company released its previous financial report, its market value has fallen by 31%. At that time, it issued a weak outlook and also announced that co-founder Reed Hastings was stepping down as chairman of the board of directors.

Since then, concerns about audience engagement and intensifying competition have only grown, Bloomberg notes. In June, Meta announced it was developing new formats for the Instagram for TV platform. Social media platforms such as TikTok and YouTube are taking time away from watching full-length streaming content, adds Barron’s. At the same time, movie theaters are experiencing a sort of renaissance. It’s no surprise that Netflix’s stock is underperforming this year compared to companies such as Cinemark Holdings, IMAX, and AMC Entertainment Holdings, Bloomberg points out.

Netflix's stock price fell following each of its last four quarterly reports. On July 16, the stock fell 0.8%. Following the sell-off, the company's shares are trading at a slight discount to the S&P 500 index for the first time since 2022, according to Barron's.

Wall Street is paying particular attention to the success of Netflix’s ad-supported plan—this topic is likely to remain one of the key issues following the release of second-quarter results, according to CNBC. As the growth in new subscribers to streaming services slows, advertising is once again becoming an important source of revenue.

Investors are also concerned about audience engagement following recent reports that viewership of series on the platform drops significantly after the first season, the network notes. According to Bloomberg, the company has been considering the possibility of launching live broadcasts and introducing bundled packages with other subscription-based streaming platforms.

“Trying to understand what they plan to do to improve engagement in the future will be key,” Hannah Howard, a portfolio manager at Gabelli Funds, told the agency, adding that a strong outlook would be a more significant factor for stock growth than solid quarterly results. “I think some viewed their attempt to acquire Warner Bros. as a way to address engagement issues, but obviously, that didn’t pan out,” she explained.

“The company is taking a defensive stance, using every tool at its disposal: from clips and video podcasts to 24/7 channels. The key question investors should be watching is whether consumers actually want Netflix to become more like YouTube,” Barron’s quotes Mike Praulks, vice president and research director at Forrester, as saying.

The analytics firm M Science warned of weak user trends in June: the data indicates that the company is experiencing its lowest quarterly net subscriber growth worldwide since 2022.

However, there are also optimistic forecasts.

“I think the results will show that the business remains healthy, advertising continues to grow, and consumers are still accepting price increases. It’s still a must-have service that hundreds of millions of people pay for. The sell-off was excessive. It’s still the world’s greatest media asset. No one has even come close to them in streaming. The stock is trading at a discount while posting double-digit growth. “It seems like a great time to buy right now,” says Conrad Van Tinhoven, portfolio manager at Riverpark Capital.

“Whenever [Netflix] shares fell, they bounced back,” Ross Gerber of Gerber Kawasaki, which holds these shares, told Bloomberg. In his view, the stock’s current valuation is simply an “incredible gift” for investors.

“Given the cautious market sentiment, if the quarterly results exceed expectations, that could go a long way toward alleviating concerns,” Barron’s quotes BofA Securities analyst Jessica Reif Erlich as saying. She recommends buying Netflix stock and has set a price target of $125. This target implies a 70% increase from the last closing price.

Erlich noted that the sell-off reflects shareholders’ concerns not only about trends in audience engagement and growing competitive risks amid media company mergers, but also about potential threats to content posed by artificial intelligence. “Netflix’s stock growth will be fueled by continued positive trends in subscriber numbers and profits, as well as strong prospects in advertising and live streaming. We believe that thanks to its world-class brand, leading global subscriber base, status as an innovator, and increased transparency regarding growth drivers, Netflix stock will perform well,” she said.

This article was AI-translated and verified by a human editor