1 Incredible Reason to Buy Netflix Stock Before It Reports Earnings on July 16

Netflix shares are down 42% over the past year and are trading at 24x trailing earnings, the lowest P/E multiple outside the 2022 sell-off. The article argues fundamentals remain supported by double-digit growth in both revenue and earnings, plus >50% of revenue from international markets and ongoing price hikes. Offsetting concerns include slowing revenue growth and near-term margin headwinds ahead of its Q2 financial update, keeping the setup more mixed than unequivocally positive.

Analysis

NFLX looks less like a broken business and more like a de-rated compounder heading into an event that could re-rate the stock either way. The important mechanism is that scale has become a competitive moat: if the industry keeps consolidating, the marginal player that would normally force pricing promos or spend aggressively is getting weaker, which should help NFLX preserve ARPU and content ROI. That said, the same scale advantage also means the market will punish any hint that content inflation is outrunning monetization; small misses can compress the multiple quickly because the stock is now priced for durability, not hypergrowth.

The next 1-3 months matter more than the next 3 years. This is primarily a guidance trade: margin commentary, full-year free cash flow, and whether ad-tier monetization is offsetting slower core subscriber growth. If management sounds cautious, the low trailing P/E may prove to be a value trap because the market will re-anchor on mid-teens growth and a lower terminal multiple. Conversely, if operating leverage holds, a higher-quality rerating can happen fast because expectations are already subdued after the drawdown.

The contrarian miss is that "cheap" on trailing earnings may simply reflect a normalized earnings base after unusually favorable cost discipline. The more durable bull case is not that NFLX is statistically cheap, but that it remains the only global premium streamer with enough pricing power to defend margins while competitors stay capital-constrained. What would falsify that thesis is any guide implying slower revenue growth with flat-to-down operating margin expansion over the next two quarters.

Key Decisions for Investors

• Tactically long NFLX into/through earnings only if implied move is attractive: use a limited-risk 1-2 month call spread rather than stock to avoid paying for a binary print; thesis breaks if guide implies margin compression.
• Pair trade: long NFLX / short WBD or PARA over the next 1-3 months to express relative pricing-power and balance-sheet discipline; fade the weaker streamer franchises that still need aggressive content spend.
• If NFLX gaps down on the print but full-year free cash flow and operating margin guide are intact, buy the dip for a 6-12 month horizon; if guide is cut, stand aside and wait for the next reset.
• Use NFLX as a watchlist long, not a conviction long, unless management confirms that ad-tier monetization is offsetting slower core growth; without that evidence, the low P/E is not enough.