Netflix shares fall as guidance disappoints
Despite an earnings beat, shares in Netflix fell overnight as the company’s margin outlook fell short of expectations
Shares in streaming giant Netflix fell approximately 6% overnight following an earnings report that delivered on the fundamentals but left investors pessimistic over the future outlook.
Netflix (NASDAQ:NFLX) shares were once counted among the world’s top stocks during the ‘FAANG’ days, but in recent years it has played second fiddle to the new formulation of the Magnificent Seven. Netflix stocks fell out of favour post-pandemic as the end of lockdown conditions posed a headwind for businesses associated with the stay-home economy.
The company is also viewed as less central to the artificial intelligence (AI) boom that is currently dictating stock market sentiment compared to US big tech stocks such as Nvidia.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Since then, markets have been unconvinced about Netflix. Shares gained 5.2% through 2025, trailing the S&P 500 by some distance through the year.
In mid-November, Netflix shares peaked at $115, up 30% for the year.
But the rally was reversed when investors appeared to sour on the company’s plans to acquire film studio Warner Bros. Discovery (NASDAQ:WBD) (WBD).
“Splashing out so much cash was never going to make the share price jump with delight,” said Danni Hewson, head of financial analysis at AJ Bell.
Shares in Netflix fell 3% on 5 December following its announcement of the plan to buy WBD.
Netflix earnings impress, but guidance leaves investors cold
The latest dent to Netflix’s shares follows its Q4 earnings release on 20 January.
Netflix delivered $45.2 billion revenue during the quarter, up 17.6% year-on-year. Net income – which included approximately $60 million in costs related to financing the WBD acquisition – rose 29% to $2.4 billion, resulting in earnings per share rising 30% to $0.56.
“Revenues, margins and profits all beat expectations, but markets don’t dwell on the rear‑view mirror for long,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “The issue was guidance.”
Specifically, the outlook for Netflix’s profitability undershot market expectations. Netflix expects its net margin to be 31.5% in 2026, above the 29.5% it achieved in 2025 but, crucially, below the 32.6% that analysts had anticipated.
“Content spend is doing the damage, a timely reminder that even streaming’s gold standard can’t afford to take its foot off the creative gas,” said Britzman.
Is Netflix stock a buy?
On average, analysts expect Netflix to post solid gains over the coming 12 months.
The consensus 12 month price target among analysts polled by data provider LSEG (London Stock Exchange Group) is $120, implying around 37.5% growth from Netflix’s 20 January close price.
Netflix stock isn’t cheap: it trades at around 27 times expected earnings and 34 times trailing earnings (as of 20 January). It will have to keep consistently growing its earnings and profitability if it is to justify this valuation.
Investors considering investing in Netflix should conduct thorough research and consider the risks involved carefully before doing so.
-
Will fintechs change the way you invest?: MoneyWeek TalksPodcast MoneyWeek's digital editor, Kalpana Fitzpatrick, speaks to Revolut Trading CEO Yana Shkrebenkova about how fintechs are changing the way people approach investing.
-
Six steps business owners should consider before April inheritance tax relief changeNew limits to inheritance tax-free allowances are coming in from the Spring that affect business owners. Those looking to sell or transfer their assets into a trust before the changes need to act now
-
New year, same market forecastsForecasts from banks and brokers are as bullish as ever this year, but there is less conviction about the US, says Cris Sholto Heaton
-
How to profit from the UK leisure sector in 2026The UK leisure sector had a straitened few years but now have cash in the bank and are ready to splurge. The sector is best placed to profit
-
Who won the streaming wars?The battle of the TV and film streaming giants for dominance looks to be entering a final phase. The likely winner may surprise you, says Simon Wilson
-
Metals and AI power emerging marketsThis year’s big emerging market winners have tended to offer exposure to one of 2025’s two winning trends – AI-focused tech and the global metals rally
-
Quality emerging market companies with consistent returnsOpinion Mark Hammonds, portfolio manager at Guinness Global Investors, selects three emerging market stocks where he'd put his money
-
Coreweave is on borrowed timeAI infrastructure firm Coreweave is heading for trouble and is absurdly pricey, says Matthew Partridge
-
An AI bust could hit private credit – could it cause a financial crisis?Opinion Private credit is playing a key role in funding data centres. It may be the first to take the hit if the AI boom ends, says Cris Sholto Heaton
-
The top stocks of 2025 - did you pick a winner?Last year was a chaotic one for the stock market, but which stocks did investors buy the most of?
