Netflix stock slumps 10%: why analysts see a buying opportunity

Shares of Netflix tumbled on Friday after the streaming giant issued weaker-than-expected guidance for the current quarter, overshadowing a strong first-quarter earnings beat and triggering a sharp selloff in premarket trading.

The stock fell about 10.53% to $96.44 after the market opened on Friday, even as broader market sentiment improved on easing geopolitical tensions.

The decline came despite Netflix reporting earnings per share of $1.23, well above analyst expectations, and revenue of $12.25 billion, which also topped forecasts.

Guidance overshadows strong quarter

Investors focused on Netflix’s unchanged full-year outlook, which disappointed a market that had been expecting an upgrade following recent price hikes and a $2.8 billion breakup fee from its failed acquisition attempt involving Warner Bros. Discovery.

“This quarter was all about guidance for Netflix. The setup going in was as good as it gets: The Warner Bros. Discovery deal collapse freed up hundreds of millions in avoided integration costs, US price hikes kicked in at the end of March, and the ad business appeared on track to double this year,” said Thomas Monteiro, senior analyst at Investing.com.

“That combination should have been more than enough for Netflix to raise its full-year profit targets - and that's exactly what the Street was expecting. But what was presented tonight regarding expectations raises the risk that both macro and structural issues may have a greater impact on growth than previously expected,” he added.

Netflix maintained its forecast for full-year revenue between $50.7 billion and $51.7 billion and operating margins of 31.5%. Analysts had anticipated stronger guidance, particularly after recent pricing changes and improving subscriber trends.

Morningstar analyst Matt Dolgin noted that expectations had been elevated heading into the release.

“The market likely hoped for increased full-year guidance, given that the March price hikes came as a surprise,” Dolgin said. “The 2026 outlook of 11% to 13% organic growth was fine when it seemed the next US price increase would occur around year-end, consistent with the historical cadence,” he added. “Growth acceleration in 2027 now seems less likely.”

Analysts see potential buying opportunity

Despite the negative market reaction, some analysts remain optimistic about Netflix’s long-term prospects. Seaport Research Partners analyst David Joyce reiterated a Buy rating and raised his price target to $119 from $115.

“Our prior price target still included some Warner Bros. Discovery transaction uncertainty,” Joyce wrote in a research note. “We also wanted to give Netflix more room to run, as clarity of strategy should continue to regain the trust of investors — and therefore improve sentiment.”

Joyce added that the stock could reach $138 if the company’s advertising business outperforms expectations and its push into live TV and gaming boosts engagement.

Morgan Stanley analysts also advised investors to “buy the dip,” attributing the weak guidance to timing factors around US price hikes and early-year conservatism. They noted that viewing hours in the first quarter grew at a pace similar to the second half of 2025, despite competition from major events like the Winter Olympics.

At the same time, they highlighted continued momentum in Netflix’s advertising business, with “no signs of macro weakness.”

Leadership change and growth strategy in focus

The earnings report also marked a leadership transition, with co-founder Reed Hastings announcing he would step down as executive chairman when his term ends in June.

“My real contribution at Netflix wasn't a single decision; it was a focus on member joy, building a culture that others could inherit and improve, and building a company that could be both beloved by members and wildly successful for generations to come,” Hastings said. “Netflix's greatness is so strong that I can now focus on new things.”

The company emphasized future growth opportunities through advertising, live programming, and gaming. Co-CEO Greg Peters said the platform still has significant room to expand.

“You can use any metric and see we have tons of room for growth ahead of us,” he said.