Shares of Netflix (NFLX +0.94%) are down an astounding 73% year to date and 75% from their all-time high recorded back in Nov. 2021. In a case of "whatever can go wrong, has gone wrong," Netflix has faced internal setbacks (a declining subscriber base) and external headwinds (fierce competition in the streaming sector).
So, is now the time to buy Netflix? Let's dig a little deeper.
Image source: Getty Images.
What do you call a growth stock that isn't growing?
When Netflix first introduced streaming movies and TV back in 2007, the company was forging a new path. Over the next decade, consumers and investors alike became familiar with cord cutting and witnessed how Netflix was transforming the entertainment industry.
During this time, Netflix's revenue surged. And it wasn't just that revenue was moving higher -- the company's growth rate was accelerating. Quarterly revenue growth rose from a low of 6.8% in 2008 to 51.7% in 2011. After crashing back to single digits in 2013, growth began a steady climb that peaked above 40% in 2018 -- just as several new competitors began to enter the streaming market.
Data by YCharts.
Today, Netflix's revenue growth is approaching 15-year lows. Its first-quarter top-line growth of 9.8% was less than half its year-ago rate of 24.2%.
NASDAQ: NFLX
Key Data Points
Wall Street doesn't think Netflix can regain its mojo
Savvy investors know revenue estimates can be a critical forward-looking metric. Wall Street analysts who cover Netflix tweak their estimates based on publicly-available data, management's comments, and proprietary surveys. And while these estimates aren't perfect, they often come close to the true figures.
Data by YCharts.
As you can see in the chart above, Wall Street analysts have been slashing their 2023 revenue estimates for Netflix. Consensus estimates now place annual revenue growth around 11% over the next two years. This shows the analyst community expects the weak growth rates at Netflix to continue.
Is Netflix a buy?
It can be tempting to look at a beaten-down stock like Netflix and assume that much of the downside risk has already come out. However, it's critical to understand why a stock has dropped so much. In Netflix's case, intense competition, combined with a surprise decline in subscriber figures, has driven the stock off a cliff.
Until Netflix can demonstrate it can reverse the slide in subscribers (and keep in mind the company expects to lose up to two million subscribers in the current quarter), I'm not interested in owning shares -- even with the stock down so much this year.
