After the company delivered yet another disappointing quarter to kick off 2022, investors have raced to dump shares of the popular video streaming provider Netflix (NFLX 0.49%). The company enjoyed a massive bull run throughout the pandemic, owing to stay-at-home orders, but has watched its stock price collapse 71% in the past six months. In its latest shareholder letter, management revealed that the COVID-19 boost to streaming clouded the true picture until recently. 

As competition in the streaming arena gathers momentum at a red-hot pace, investors are concerned that Netflix won't be able to sustain the level of success that it once did. And after two consecutive outings of weaker-than-expected financials, sentiment pertaining to the company's stock is at an all-time low.

Are Netflix's better days behind it? Let's discuss the company's first-quarter results and what they mean for the future of its business.

Person on tablet streaming.

Image source: Getty Images.

An underwhelming start to 2022

The company's $7.87 billion in sales in the first quarter of 2022 missed consensus estimates by a trifling 1%, while its $3.53 EPS crushed Wall Street's expectations by a walloping 21%. Unfortunately for Netflix, the earnings beat was greatly outshone by its low subscriber count. Not only did its 6.7% membership growth fall short of analysts' forecasts, but the company also experienced a rare net loss of 200,000 subscribers and is projecting another 2 million in the upcoming quarter. 

The pandemic painted a picture of the company growing at an unsustainably fast rate, with management citing the COVID-19 pull forward as the root of its slowing growth in 2021. It's also forecasted that in addition to its 222 million paying households, subscription passwords are being shared with another 100 million households worldwide. Couple these two factors with increased competition from world-leading enterprises like Disney+, Amazon Prime Video, and Apple TV+, and it should come as no surprise that the company's growth is unwinding. 

Is Netflix a buy today?

When the going gets tough, it's not always easy to see the light at the end of the tunnel. That said, there's still plenty to like about Netflix.

For starters, the company has the largest audience among streamers, controlling 45% of the global video streaming industry and 6% of total U.S. TV time. Serving as the most Emmy-winning TV network and boasting six out of the 10 most-searched shows globally in 2021, the company has taken a major leap forward with respect to the quality of its content. And while Netflix may be experiencing growing pains, the company remains the world's largest streaming service on all fronts: paid memberships, total engagement, revenue, and net profit.

As a result of the ongoing sell-off, Netflix stock is now trading at its lowest valuation in five years. Today, the stock pegs a price-to-earnings multiple of 18.5, which is lower than all of its primary competitors except Warner Bros Discovery.

NFLX PE Ratio Chart

NFLX PE Ratio data by YCharts

Not only that, the company's current price-to-earnings ratio is a small fraction of its five-year average, 104. It's not unreasonable to endure multiple contractions, given its slowdown in subscriber growth; however, I'm not sure the company's recent performance warrants an all-time low valuation. Besides its growth rate, Netflix is in a stronger position today than it was in 2017, the last time the stock traded at current price levels. Revenues and profits are still surging thanks to rising subscription fees.

Netflix isn't doomed -- it's simply a maturing company. In spite of its latest earnings report, investors should feel comfortable with the long-term trajectory of the streaming juggernaut's business. At current valuation levels, the FAANG stock appears to be an intriguing buy. Expect short-term headwinds to affect its share price for the time being, but in the long run, Netflix will maintain its status as a video streaming leader.