Netflix Hits a 52-Week Low as Valuation Gets Cheaper

This article first appeared on GuruFocus.

Netflix Inc. (NFLX, Financials) is reaching a new 52-week low as investors weigh slower growth versus a much cheaper valuation.

The business is trading at around 17 times expected profits, which some analysts deem attractive on a historical value basis. The firm’s doing well.Third quarter revenues as projected, operating margin of 34.6% Churn also improved despite price rises, and Netflix bought back a record $4.8 billion of its stock. The problem is growth.Its projection for the fourth quarter suggests a further fall and cut its outlook for advertising revenue by around 10%.There’s also more rivalry, with outlets like YouTube and the combined Skydance-HBO Max-Paramount+ company battling over viewers.The conversation among investors now is less about whether Netflix is a solid company and more about how much growth is required to make the stock worth it.Large margins and buybacks might signal Netflix doesn’t need prior growth to make shareholder value. Next up to watch: how advertising and subscription patterns play out during the fourth quarter.