After a tumultuous 2022, growth stocks have been doing extremely well this year. It's clear that investors are warming up to the sector once again.

Streaming giant Netflix (NFLX -1.09%) in particular has seen its shares soar 45% in 2023. But investors might be able to take advantage of a recent dip in the stock price. The streaming giant's Q3 revenue forecast disappointed Wall Street, sending shares 10% lower since the earnings announcement. 

Is it time to buy this unstoppable FAANG stock right now? Let's find out. 

Recapping the second quarter 

Management guided for revenue of $8.5 billion in the current quarter, which was less than Wall Street analysts were hoping to see. Moreover, the business posted sales of $8.2 billion in Q2, up just 2.7% year over year. But this figure was below management's prior forecast. 

Besides these revenue numbers, Netflix reported what I thought was an upbeat quarter. The company surprised to the upside by adding 5.9 million net new subscribers, its most important metric. And for the third quarter, Netflix is projected to bring on the same number of customers. That's definitely what shareholders want to see, especially as the streaming industry becomes incredibly crowded. 

Netflix's ad-supported tier is doing well, having double the members as it did just three months ago. "It's still off a small membership base, so current ad revenue isn't material for Netflix," the company's shareholder letter reads. 

Cracking down on password sharing has also been a huge focus for the leadership team. Netflix expects revenue growth to pick up in the second half of 2023 as the business better monetizes these accounts. 

The company's financial situation keeps getting better. In 2022, Netflix produced $1.6 billion of free cash flow (FCF). Management said investors could expect the business to keep this up in subsequent years. This year, Netflix is slated to generate a whopping $5 billion of FCF, up from previous guidance of $3.5 billion.  

To be clear, this has to do with what's going on in the broader industry. The writers' and actors' strike means that Netflix will spend less cash on content throughout this year. And that leads to greater FCF production in the near term. 

Sizing up the competition 

These Q2 results, and especially the update regarding FCF, are extremely encouraging as they relate to the state of Netflix today. The business is in a very solid financial position right now, which helps it stand out among rivals in the streaming industry. 

Walt Disney is probably the biggest direct competitor for Netflix, with a total of 231 million subscribers (across Disney+, Hulu, and ESPN+) as of April 1. And even with that massive scale, Walt Disney's direct-to-consumer (DTC) segment, which houses its streaming assets, is far from being profitable, posting an operating loss of $659 million in the most recent fiscal quarter. CEO Bob Iger hopes that Disney+ can reach profitability by fiscal 2024. 

There's also Warner Bros Discovery, which owns the revamped Max streaming service. This company's DTC division has 97.6 million subscribers (as of March 31). But like Disney, it's not yet profitable on a GAAP basis. This only shines an even brighter light on how favorable Netflix's position is. 

Valuation matters 

Although Netflix stock remains 38% below its all-time high from November 2021, it has skyrocketed 95% in the last 12 months, crushing the Nasdaq Composite by a huge margin. Unsurprisingly, that kind of performance has resulted in a steep valuation. As of this writing, shares trade at a trailing price-to-earnings ratio of 46. 

The best time to have bought Netflix stock in recent memory was about 13 months ago. Investors were certainly down on Netflix's prospects then. The P/E ratio at the time was around 16. This means that the current valuation looks to be very expensive. 

But if you're bullish on the company and still believe in the streaming leader's long-term potential, which includes attracting more subscribers across the world and continuing to boost its profitability well ahead of its competition, then maybe it's a good idea to dollar-cost average into the stock over the next several months.