Why Netflix Stock Lost 13% in July

Core Viewpoint - Despite a strong earnings report, Netflix's stock did not rise due to valuation concerns overshadowing its solid growth performance [1][2][6] Group 1: Earnings Performance - Netflix reported a revenue increase of 16% to $11.08 billion, slightly exceeding expectations of $11.04 billion [4] - The company's operating margin improved from 27.2% to 34.1%, with earnings per share rising from $4.88 to $7.19, surpassing the consensus estimate of $7.06 [5] - Netflix raised its revenue guidance for the year from a range of $43.5 billion-$44.5 billion to $44.8 billion-$45.8 billion, and adjusted its operating margin forecast from 29% to 29.5% [6] Group 2: Market Reaction - The stock fell 13% in July, contrasting with the S&P 500's 2.2% gain, indicating investor concerns about valuation despite strong earnings [2] - The stock was already declining prior to the earnings report, suggesting that high expectations may have contributed to the post-report sell-off [4][6] Group 3: Future Outlook - Netflix's current price-to-earnings ratio stands at 50, which is considered high for a growth stock [8] - The company's initiatives in advertising and local content are expected to drive future growth and improve profit margins as the subscriber base expands [8] - While short-term valuation pressures may affect the stock, Netflix's leadership in streaming and broader growth trends are anticipated to support long-term success [9]