What’s up with Netflix?

This week, we’re talking about:

Netflix reported earnings this week and the stock is flopping worse than Supergirl!

It’s been a year since K-Pop Demon Hunters and Wall Street is saying the stock ain’t Golden.

So what has this streamer in the Upside Down?

The stock is nearly cut in half from it’s all time highs!

Is the revenue still growing by double digits?

Yes, revenue is up 13%.

Are they still making multiple billions per quarter in net income?

Yes, net income is up 9% to $3.4B. That is roughly $8B more than Wall Street darling SPCX.

Are they still taking over the world? Growing rapidly in every region?

Hmmm…. Looks like it.

So what happened? Why the big sell-off?

Oh my goodness!

Projected revenue of only $12.9B instead of $13.0B?

They might as well be losing their marbles! A triangle-masked, sweatsuit-clad assassin is taking them out back right now.

Sure, they are growing at double digits.

Sure, they are the number one streaming service on the planet.

Sure, they have those juicy recurring revenues that come with a subscription business.

Sure, they are expanding all over the world.

Sure, they are buying back shares as the shares are cheap.

Sure, they have a healthy balance sheet.

Sure, all their growth is organic and not just paying crazy prices for existing media companies.

But…

The growth rate is slowing!

Every genius on Wall Street knows that you pay any price whatsoever for a company when the growth rate is increasing.

If the rate increases forever, then a company would bring in infinite money!

But if the positive growth rate slows down?

Panic!

No need to put any numbers to it. If the growth rate is increasing: buy. If the growth rate is decreasing: sell.

I mean, after all, could you imagine if NFLX only grew at…

15% per year?

You’d get an 18% average annual return if priced like an average S&P 500 stock over the next five years.

Final Thought

Buy great companies with strong fundamentals when silly sentiments have caused a sell-off. Rinse. Repeat.