TLDRs;
- Netflix shares have plunged nearly 46% over the past year despite strong advertising growth.
- Netflix expects advertising revenue to double to approximately $3 billion in 2026.
- Investors remain concerned about valuation levels and potential acquisition activity.
- Markets are closely watching Netflix’s July 16 earnings report for growth signals.
Netflix Inc. (NASDAQ: NFLX) continues to face mounting pressure from investors as the streaming giant’s stock remains near yearly lows, even as the company aggressively expands its advertising business and targets roughly $3 billion in ad revenue.
Shares of Netflix closed at $70.90 on Thursday, declining 1.31% during the trading session and briefly touching a fresh 52-week low of $70.86. The stock has now fallen approximately 46% over the last 12 months, reflecting growing investor concerns about valuation, slowing growth, and uncertainty surrounding the company’s long-term strategic direction.
The recent selloff has erased roughly $272 billion in market value from Netflix since the stock peaked at $134.12 over the past year, underscoring the widening gap between Wall Street expectations and investor sentiment.
Advertising Growth Accelerates
Despite weakness in the stock price, Netflix’s advertising segment continues to expand at a rapid pace.
The company revealed earlier this year that more than 60% of new subscriber sign-ups in markets offering ad-supported plans opted for the lower-priced advertising tier. Netflix also reported that its advertiser base has grown significantly, surpassing 4,000 clients globally, representing an increase of roughly 70% compared with the previous year.
Executives expect advertising revenue to nearly double this year, reaching approximately $3 billion.
Co-CEO Gregory Peters previously told analysts that Netflix remains on track to deliver annual revenue growth between 12% and 14%, while emphasizing that advertising is becoming an increasingly important component of the company’s monetization strategy.
Co-CEO Ted Sarandos has likewise highlighted advertising as a major future growth engine, describing it as a key pillar supporting the company’s broader business model.
However, despite this progress, advertising still accounts for only a relatively small portion of Netflix’s overall business. Based on the midpoint of the company’s projected 2026 revenue range of $50.7 billion to $51.7 billion, advertising would contribute less than 6% of total sales.
Valuation Questions Intensify
While operational performance remains solid, investors are increasingly questioning whether Netflix’s premium valuation can still be justified.
The company currently trades at approximately 24 times its projected 2026 free cash flow estimate of around $12.5 billion. Additionally, Netflix trades at roughly six times expected annual revenue, metrics some investors consider demanding amid moderating growth rates.
Concerns have also emerged regarding potential merger and acquisition activity.
Reports linking Netflix to possible deals involving Roku Inc. and Lionsgate Studios, combined with investor memories of the company’s unsuccessful pursuit of Warner Bros. Discovery, have raised concerns that management could pursue expensive acquisitions.
Some analysts argue that investors would prefer Netflix to remain focused on its existing streaming ecosystem rather than pursuing transformational deals.
Company representatives have downplayed speculation surrounding potential acquisitions, insisting that Netflix remains primarily focused on building its own platform and content offerings.
Investors Await Q2 Earnings
Attention is now turning toward Netflix’s upcoming second-quarter earnings release scheduled for July 16.
Management has already warned investors that revenue growth during the second quarter is expected to slow compared with the first quarter. Netflix forecasts Q2 revenue of approximately $12.57 billion, representing year-over-year growth of about 13%.
The company also expects an operating margin of 32.6%, lower than the 34.1% recorded during the same period last year. Management attributed some of the pressure to heavier content amortization expenses during the first half of the year.
Investors will closely monitor subscriber additions, advertising momentum, and management’s commentary regarding future growth initiatives.
Analysts Remain Divided
Despite the stock’s prolonged decline, some Wall Street analysts continue to maintain bullish outlooks.
Wolfe Research analyst Peter Supino recently reiterated an outperform rating on Netflix alongside a $107 price target, implying significant upside from current trading levels.
Nevertheless, market participants remain cautious as Netflix attempts to convince investors that growth in advertising, subscriber monetization, and pricing power can offset concerns surrounding valuation and future expansion plans.
With shares hovering near 52-week lows, the upcoming earnings report could prove pivotal in determining whether investor confidence can be restored or whether further downside lies ahead for the streaming giant.
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