Netflix is still far off from the high value it had in 2025, but the bigger picture has more to say. The streaming giant, Netflix, has the world’s largest subscription-based entertainment platform with over 300 million paying customers worldwide.
Its unrivaled reach and scale gives the company the power to spend more than its rivals on original content and licensing. This strengthens its position at a time when many competitors are losing ground and their profits are going down.
Although the price of the stock has decreased by 32% from its last peak, long-term investors might have a different view of the dip. The Netflix shares today are still at a whopping 88,900% higher than at the time of the company’s IPO in 2002.
This serves as a reminder that the company has gone through several phases of ups and downs before gaining new growth. The question now is whether the recent price drop is a sign of the company’s downfall, or an entry point for investors to get in.
Adaptation & Growth
The platform’s ability to adapt has been the most important move for its success. Netflix quickly gained a competitive edge and is now reaping the rewards, as consumers in many areas of the world are cutting back on spending. However, the firm’s most significant move for the future was the introduction of a more inexpensive subscription tier with ads in 2022.
The $7.99 per month plan was least expensive among the company’s offerings, which soon became a major factor for subscribers’ growth. Also, it was responsible for about half of new users in regions where it was accessible.
With the idea of attracting new users with the lower-price plan, the company changed its revenue model. Now, the revenues generated from the ad-tier users grow over time as Netflix increases advertising rates in line with audience size, which is unlike traditional subscriptions that are stable and remain relatively the same.
This situation has made the company to aggressively invest in categories like live sports content, which has both the scale of audience and the premium prices for advertising.
Content Expansion & Bold Acquisition
The acquisition of Warner Bros. Discovery by Netflix was an immense ambition to dominate. The proposed $82.7 billion agreement would enfold not only all the intellectual properties under Netflix, but also the franchises like Harry Potter, Lord of the Rings, Game of Thrones, and the whole DC Entertainment universe. In case of approval, this acquisition would tremendously increase Netflix’s content library and form a strong competitive barrier.
Also, regulatory scrutiny is an area of concern. Given Netflix’s already stronghold position, the antitrust authorities are most likely going to think that the deal would result in an unfair reshaping of the streaming market.
While the transformation could indeed be very powerful, Netflix’s core business has remained strong and performing well even without that.
Attractive Valuation
The recent downturn in the market has led to a situation where Netflix’s stock becomes more attractive from a valuation point of view. Based on the trailing earnings of $2.39 per share, the stock is currently trading at a P/E ratio of about 38, which is lower than its three-year average of almost 45.
Its forward-looking estimates are even better. Wall Street predicts that Netflix will make $3.23 per share in 2026, which translates into a roughly 28% forward P/E ratio.
This means that if Netflix just achieves its earnings expectations, the stock can go up very well to just remain at the same current valuation. With the quarter of 2025 coming to an end, Netflix is likely to report record-breaking financial results.
The focus of investors will be on advertising revenue, which is expected to double again in 2025, as it already doubled in 2024.
Bottom Line
On one hand, there are still some risks to be faced, specifically due to the regulatory approval of the Warner Bros. Discovery merger, and the overall macroeconomic situation. On the other hand, Netflix’s essential features are still impressively strong.
The company’s advertising segment is quickly becoming a significant player, the worldwide customer base is still growing, and the power to set prices is even getting stronger.
For the investors with a long-term perspective, the recent decline of 32% in the stock price might indicate a rare opportunity to invest in a company that always stays at the forefront of the digital entertainment industry, instead of a signal to sell.
Netflix is going through a short period of volatility, but its size, profitability, and improving business model signals that the long-term growth story is still very much alive.
