Netflix Stock Dips Despite Strong 2025 Growth: Is the Selloff Overdone?

Here’s the paradox that has confounded many investors: Netflix delivered one of its most impressive years on record in 2025, yet its stock has tumbled roughly 40% from last summer’s peaks and now trades below $80. Revenue surged 16% year-over-year to reach $45 billion, subscriber counts crossed 325 million globally, and the company expanded operating margins significantly. So why the dramatic dips in share price? The answer reveals important truths about how markets price in expectations—and where savvy investors might find their advantage.

The Growth Story Nobody Can Argue With

Netflix’s 2025 financial performance was genuinely stellar. On top of 16% revenue growth in 2024, the company replicated that same double-digit growth rate in 2025—a feat that speaks to the durability of its core business model. The composition of this growth is equally noteworthy. Paid membership revenue benefited from both subscriber additions and pricing increases across its customer base. Simultaneously, Netflix’s advertising business—a venture that barely existed just a few years ago—has matured into a meaningful contributor, representing approximately 3% of total revenue in 2025.

Perhaps most impressive, Netflix achieved all this expansion while expanding its operating margin from 26.7% in 2024 to 29.5% in 2025. This margin expansion demonstrates the company’s ability to monetize its subscriber base more efficiently, a quality often overlooked but absolutely crucial to long-term value creation. Management expects this momentum to continue, projecting revenue growth of 12% to 14% in 2026 and further operating margin expansion to 31.5%.

Why the Market’s Reaction Might Actually Make Sense

The dips in Netflix’s stock price become less puzzling when you consider how much growth was already baked into valuations during last summer’s rally. Even after the recent decline, the stock still carries a price-to-earnings ratio of approximately 32—a level that assumes years of continued double-digit expansion. Put another way, investors had already paid a substantial premium for Netflix’s success before the recent pullback occurred.

A more useful lens for evaluating where Netflix stock stands today is its forward price-to-earnings multiple, which values the company against projected earnings over the next 12 months rather than trailing performance. This metric proves particularly valuable for Netflix because of the company’s rapid growth trajectory combined with accelerating operating leverage. When combined with management’s expectations for continued margin expansion, earnings growth should outpace revenue growth substantially.

With shares trading around $80, Netflix’s forward P/E ratio sits at roughly 26. For a company that grew revenue 16% while dramatically expanding profitability margins, a forward multiple in that range starts to look considerably more reasonable than the trailing P/E suggests. The company’s track record of providing “actual internal forecasts” rather than conservative guidance—and management’s continued optimism about 2026 prospects—suggests the market may be pricing in more caution than fundamentals warrant.

Competitive Pressures: The Real Risk Factor

Yet even with Netflix’s impressive business execution, the investment case isn’t without complications. Netflix management describes its competitive environment as “intensely competitive” in ways that go far beyond traditional streaming rivalries. The company competes not just against other streaming platforms, but against the entirety of how consumers spend leisure time—social media, gaming, and countless other digital activities.

The competitive landscape has also shifted. YouTube has increasingly pivoted toward longer-form content and live sports programming, bringing Google’s vast resources into direct competition with Netflix’s core offering. Amazon’s sprawling library of series and films, bundled with Prime membership, represents another significant threat. Apple’s entry into prestige content production has also emerged as a quietly meaningful competitive force. Meanwhile, television consumption patterns continue to evolve in ways that blur the lines between traditional streaming and other digital entertainment.

This competitive intensity is precisely why the stock’s current valuation, while more reasonable than last summer’s peaks, still doesn’t provide sufficient margin of safety for most investors. The forward P/E of 26 assumes Netflix maintains its current trajectory despite intensifying competition. Should competitive pressures become more acute or consumer preferences shift unexpectedly, even a multiple of 26 could prove expensive.

The Investment Verdict: Better Opportunities Exist

Netflix stock is gradually approaching a price that more appropriately balances the company’s impressive fundamentals against the real competitive risks it faces. However, at current levels around $80, that equilibrium hasn’t quite been reached. The dips have made the stock more attractive than it was last summer, but not necessarily compelling enough to make it a priority addition to most portfolios.

Notably, major investment research platforms have identified other opportunities they believe merit greater attention at this juncture. The screening process that guides these recommendations has historically identified significant winners—think of Netflix itself when it made such lists back in 2004, when a $1,000 investment at that recommendation would have grown to over $446,000. The fact that Netflix didn’t make the current list suggests the market still has better prospects to offer at present valuations.

For patient investors willing to wait, Netflix may eventually reach a price that offers a compelling risk-reward balance. Until then, the stock’s recent dips, while tempting, leave other opportunities deserving of closer attention.