Netflix and MercadoLibre Are Underperforming the S&P 500. Here's the 1 Stock I'd Buy in August.

Netflix is down 38% YoY and slid ~9% in the two days after its mid-July Q2 update, as revenue growth decelerated to 13% in 1H and its latest guidance implied only an 11.7% increase. MercadoLibre is down 23% YoY and dropped after Q2 results despite 50% revenue growth and a beat, with margins contracting and credit-loss provisions rising. Both names trade at relatively low valuation multiples (NFLX ~19x next-year earnings; MELI ~31x) but near-term fundamentals and investor sentiment remain cautious.

Analysis

The market is treating both names as “good businesses, bad stocks,” but the mechanism differs. NFLX is now a durability debate: if revenue growth continues to slow while monetization relies more on pricing and lower-friction entry products, the multiple can compress even at a headline-low forward P/E because the market pays for visible mid-teens growth, not just scale. The hidden risk is that free trials/free-tier experiments outside the U.S. are defensive tactics that protect engagement, but they can also dilute ARPU and signal that subscriber economics are becoming harder to extend.

MELI is a higher-quality growth story, but the current selloff is really an earnings-quality debate. Heavy credit provisioning and promotional intensity can suppress near-term margin expansion even when topline prints look excellent, so the key question for the next 1-2 quarters is whether losses are cyclical or a structural reset in take-rate economics. If provisions normalize, the stock can re-rate quickly because operating leverage in LATAM digital commerce/fintech is still underappreciated; if they don’t, the apparent valuation discount is a value trap.

Consensus is probably missing that these are not the same setup: NFLX is facing a slower secular growth slope, while MELI is paying for share and still has a long runway. That argues for relative value rather than outright beta exposure. The main falsifier is simple: if NFLX re-accelerates revenue growth back toward the mid-teens or MELI’s credit losses keep rising as a percent of revenue, the current relative trade breaks.

Key Decisions for Investors

• Small relative-value long MELI / short NFLX for 1-3 months; thesis is faster secular growth and better long-run re-rating potential versus NFLX’s decelerating growth profile. Keep size modest because both can gap on earnings.
• Do not short NFLX outright here; use it only as a financing leg. The downside case requires another leg down in revenue growth or ARPU, so wait for confirmation from the next guidance cycle before pressing bearish exposure.
• If MELI stabilizes after earnings, buy a partial position on a second-day pullback rather than the open; the trade only works if market focus shifts from promotion spend to retained user monetization. Falsify on another quarter of rising credit-loss provisions.
• For options traders, consider a 3-6 month NFLX put spread only if the stock fails to reclaim its post-earnings gap and ad-tier commentary remains vague; target a limited-risk expression of multiple compression, not a crash thesis.