Is Netflix a Buy Ahead of Earnings? It Looks Like It

NFLX +1.01% WBD +1.62%

Key Points

• Netflix has given back basically all of its 2025 gains after a multi-month selloff exacerbated by poor earnings and uncertainty about its Warner Bros. deal.

• However, technical indicators are flashing oversold just as a key catalyst appears on the horizon.

• Analyst sentiment remains broadly bullish, suggesting much of the bad news may already be priced in.

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Shares of streaming giant Netflix Inc. (NASDAQ: NFLX) head into their next earnings report in a pretty uncomfortable position. Since hitting all-time highs last summer, the stock has fallen roughly 30% in a sustained downtrend, effectively erasing all its 2025 gains. For a stock once viewed as an ultra-reliable performer, the drop has been jarring.

The selloff has been driven by a combination of factors rather than a single shock. The stock was already on the back foot heading into October's earnings report, and the missed earnings per share (EPS) print only added to the negative sentiment.

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Since then, uncertainty around Netflix's proposed acquisition of Warner Bros. Discovery (NASDAQ: WBD) has further weighed on the stock, as investors remain uneasy about rising debt levels, execution risk, and strategic distraction.

However, with its next earnings report due in less than two weeks, there are reasons to think that much of the downside is already priced in—let's take a look at why this could be a buy-the-dip opportunity.

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Why the Dip Is Starting to Look Compelling

From a technical perspective, Netflix is starting to flash classic signals that the bears are exhausted. The stock's relative strength index (RSI) is sitting around 29, firmly in oversold territory. That alone does not guarantee a reversal, but it does suggest selling pressure has become stretched. Adding to that, the stock's MACD just printed a bullish crossover, a reasonably reliable signal that downside momentum is starting to fade.

The company's valuation also looks very different from where it stood last summer. Netflix's price-to-earnings (P/E) ratio is now at its lowest level in years, reflecting a sharp reset in expectations and bolstering the case that the stock is on sale at a discount. For investors with a long-term horizon, that matters—the attractive entry point could make it easier to weather any volatility that may appear in the near term.

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It is also worth noting that aside from October's EPS miss, Netflix has a solid track record of outperforming analyst expectations each quarter.

That history does not erase recent disappointment, but it does make it harder for the bears to argue that further downside is inevitable.

Analysts See Far More Upside Than Downside

Sell-side commentary suggests the market may be leaning too far toward worst-case assumptions. In recent weeks, both Morgan Stanley and Wolfe Research have reiterated Buy or equivalent ratings, with price targets around the $120 mark—not bad considering the stock is trading around $90 currently.

Even the more cautious voices suggest the stock can only go up from here. The team at CFRA downgraded Netflix to a Hold earlier this month, but paired that with a $100 price target.

With the stock trading well below that level, even a neutral stance implies the shares are oversold rather than expensive.

The common thread across analyst commentary is that a large portion of the disappointment is likely already priced into the stock.

Concerns around the Warner Bros. deal have been extensively debated, and there's little room for fresh negativity unless earnings miss materially again.

Some Risks Remain

None of this removes the risks. Netflix is heading into this month's report with more riding on the results than usual, and another bad miss would likely trigger further selling. Investors will also want clarity on the company's strategic direction.

That said, the setup is asymmetric. With the stock down 30% from its highs, sentiment weak, and valuation compressed, the downside from here appears more limited than at any point over the past year. Any signs that growth is accelerating or that profitability is back on track should drive a sharp recovery rally.

The tricky part, of course, is timing. Buying into this rebound potential ahead of earnings always carries uncertainty. But with expectations low and so much disappointment already priced in, the risk/reward profile is leaning heavily in favor of the bulls right now.

The article "Is Netflix a Buy Ahead of Earnings? It Looks Like It" was originally published by MarketBeat.