Netflix Stock Slides as BofA Sees Opportunity After Earnings Miss

Netflix shares ended a volatile week sharply lower, closing at $68.95 on Friday, July 17, after the company's third-quarter sales forecast fell short of Wall Street's expectations. The stock dropped 7.26% that day, despite Netflix reporting second-quarter earnings that were nearly in line with analyst estimates. The selloff highlights how investors are increasingly focused on future growth rather than past performance, especially as streaming competition intensifies and questions about user engagement persist.

Mixed Analyst Response

While several analysts cut their price targets following the earnings release, most maintained their existing ratings. Bank of America lowered its price target for Netflix from $125 to $105 but kept a Buy rating, signaling that the recent decline may have created a more attractive entry point for long-term investors. The new target implies a potential upside of about 52% from Friday's close, based on Bank of America's analysis. The firm argues that Netflix's stock price has fallen faster than the underlying business fundamentals would justify, especially given the company's global subscriber base of over 300 million.

Bank of America's stance echoes a broader debate on Wall Street about whether Netflix is now undervalued or if further downside risk remains. The company's shares now trade at less than 20 times earnings, a discount to the S&P 500, despite Netflix's dominant position in global streaming. Still, the stock remains a battleground, with bulls and bears divided over the company's growth prospects and competitive threats.

Guidance and Growth Concerns

Netflix reported earnings of $0.80 per share on $12.56 billion in revenue for the second quarter, according to CNBC. While earnings slightly exceeded analyst forecasts, revenue came in just below expectations. The company guided for third-quarter revenue of about $12.86 billion, representing roughly 12% year-over-year growth but falling short of the $13 billion analysts had hoped for. Full-year revenue guidance was narrowed to a range of $51 billion to $51.4 billion, without an upward revision. U.S. and Canada revenue was softer than anticipated, raising concerns about market saturation in Netflix's most mature region.

One change that unsettled some investors was Netflix's decision to report engagement metrics only once a year instead of twice. Engagement, measured by total viewing hours, is a key indicator for pricing power, ad sales, and subscriber retention. In the first half of the year, Netflix members watched more than 97 billion hours of content, with viewing hours up 2% from a year earlier, according to Variety. Management argued that not all viewing hours translate equally to revenue, but skeptics worry that slowing engagement could signal a maturing business that must spend more to maintain user attention.

Acquisition Risks and Buyback Activity

Investor anxiety has also been fueled by Netflix's recent dealmaking activity. The company pursued Warner Bros. Discovery late last year but ultimately walked away in February, collecting a $2.8 billion breakup fee, based on SEC filings. This episode left some shareholders wary of the possibility that Netflix could pursue a large, expensive acquisition that might strain its balance sheet. Bank of America, however, sees the recent share price drop as a cushion against such risks, arguing that much of the uncertainty is already reflected in the stock.

Amid the market turbulence, Netflix executed its largest-ever share buyback, repurchasing about $4.7 billion of its own stock in the quarter. The company still has roughly $27 billion in buyback authorization remaining, according to Investing.com. Large-scale buybacks can support earnings per share by reducing the share count and may signal management's confidence in the company's valuation. This move aligns with Bank of America's view that Netflix is undervalued at current levels.

What Could Drive a Rebound

Bank of America's Buy rating, despite a lower price target, is not a blanket endorsement. The firm's optimism depends on several factors: successful scaling of Netflix's advertising business, which management expects to roughly double ad sales to $3 billion this year; evidence that revenue can keep growing even if engagement plateaus; and disciplined execution on any future acquisitions to avoid margin erosion. If these conditions are met, the case for a rebound strengthens. If not, the stock's discount valuation could persist.

Wall Street remains divided, with analyst price targets ranging from the $80s to well above $100, reflecting the uncertainty around Netflix's next phase. For investors, Bank of America's call is one perspective among many, and sizing any position should depend on individual risk tolerance and conviction. As with other high-profile earnings seasons-such as the scrutiny facing Microsoft's upcoming report, as discussed in this recent analysis-the next quarter's results may be decisive in clarifying whether growth concerns are overblown or justified.

For the second quarter of 2026, Netflix reported $12.56 billion in revenue and $0.80 in earnings per share, with global subscribers exceeding 300 million. The company's share price fell 7.26% on July 17, 2026, after issuing a third-quarter revenue forecast below analyst expectations. Netflix's buyback activity reached a record $4.7 billion for the quarter, with $27 billion in authorization remaining.

Valuing a company like Netflix involves more than just tracking subscriber growth or quarterly earnings beats. Investors must weigh the sustainability of revenue growth, the impact of new business lines like advertising, and the risks associated with potential acquisitions. Share buybacks can boost per-share earnings and signal management's confidence, but they do not guarantee future returns if underlying growth slows. Ultimately, the stock's performance will depend on whether Netflix can deliver on its growth strategies while managing costs and competitive pressures in a rapidly evolving streaming landscape.