Netflix (NFLX) Stock Drops 38% — But Wall Street Still Sees 40% Upside

TLDR

• NFLX has pulled back sharply from its all-time high of $134.12 set in June 2025, now trading around $81–$82
• The ad-supported tier is growing fast, with advertising revenue expected to nearly double to ~$3 billion in 2026
• Q1 2026 revenue hit $12.25 billion, up 16% year over year, beating estimates
• Netflix’s board approved a new $25 billion share buyback, on top of $6.8 billion remaining from a prior program
• Wall Street rates NFLX a “Moderate Buy” with an average price target of ~$114–$115, implying ~40% upside

Netflix (NFLX) stock is down more than 38% from its all-time high of $134.12, hit in June 2025. It opened at $82.64 on Tuesday. For some investors, that gap is the story.

Netflix, Inc., NFLX

The 50-day moving average sits at $91.99, and the 200-day at $91.72 — both well above where the stock is trading now. The 52-week low is $75.01.

Despite the drop in price, the underlying business has kept moving in the right direction. Q1 2026 revenue came in at $12.25 billion, up 16.2% year over year, beating the analyst consensus of $12.17 billion.

EPS for the quarter was $1.23, well ahead of the $0.76 expected. Net margin stood at 28.52%, with return on equity at 40.92%.

Free cash flow on a trailing twelve-month basis reached $11.89 billion, up from $9.46 billion in full-year 2025. Full-year FCF guidance was raised to approximately $12.5 billion.

Ad Tier Gaining Real Traction

The ad-supported plan, launched in November 2022, is no longer just a footnote. The advertiser base grew over 70% year over year, reaching more than 4,000 advertisers. Programmatic advertising is on track to exceed 50% of non-live ad revenue.

Management expects ad revenue to roughly double in 2026, reaching around $3 billion. About 65% of ad-tier sign-ups over the past two years were new to the platform entirely, meaning the lower-cost plan is pulling in fresh subscribers rather than pulling people down from pricier tiers.

Retention improved across all regions year over year in Q1 2026. View hours in Q1 grew at a similar pace to 2025, even with the Winter Olympics drawing eyeballs elsewhere.

Management estimates Netflix holds about 5% of global TV viewing share today, while capturing around 7% of a $670 billion total addressable entertainment market. There’s still a lot of runway there.

Big Buyback Sends a Clear Signal

In April 2026, Netflix’s board approved a new $25 billion share repurchase authorization. That’s on top of the $6.8 billion still remaining under a 2024 program, and it exceeds the company’s entire 2026 content budget of roughly $20 billion.

This came after Netflix walked away from an $83 billion bid for Warner Bros. Discovery. The company chose to buy back its own stock instead.

CEO Ted Sarandos sold 27,312 shares in early May at an average of $87.97, though the filing noted the sale was to cover tax withholding on vesting equity awards.

Institutions own 80.93% of NFLX stock. Westerkirk Capital raised its position by 1,157.8% in Q4, ending with 130,900 shares valued at roughly $12.27 million.

On valuation, NFLX trades at a trailing P/E of about 26x, below the entertainment industry median of ~31x and well below its own five-year average of ~39x. The forward P/E sits at 23x.

Of 52 analysts covering the stock, 34 rate it Buy, 16 Hold, and none Sell. The average price target is $114.82.

Netflix is also rolling out generative AI tools including voice search and mood-based recommendations, and plans to launch a FIFA World Cup mobile game on Netflix Games ahead of the tournament.

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