Netflix Lifted Guidance. Is the Stock a Buy Following Its Drop?
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Research suggests that Netflix (NFLX -3. 38%) once again dered strong revenue and earnings growth when it reported its Q2 results on July 17, but the stock nonetheless fell on...
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July 22, 2025
01:45 PM
The Motley Fool
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Re suggests that Netflix (NFLX -3. 38%) once again dered strong revenue and earnings growth when it reported its Q2 results on July 17, but the stock nonetheless fell on the news
The ing company has been a strong performer this year, with the stock up 38% year to date as of market close July 21 despite the pullback, given current economic conditions
As such, expectations were high going into the report (this bears monitoring)
A huge market winner over the years, let's see if this pullback could be a buying opportunity, especially after the company raised its guidance
Solid growth and upbeat outlook Netflix said the key to its success is offering a wide array of quality series and films that resonate with its viewers
It noted that a hit show or film typically only accounts for 1% of total viewing, so it looks for a continuous of quality content across regions and genres to keep viewers and bring in new ones, in today's financial world
As an international company, Netflix is also using a "local for local" content strategy to appeal and connect with audiences in their countries
In contrast, It said non-English content now makes up more than one-third of its viewing hours
At the same time, Meanwhile, these shows can also become hits with American audiences, such as Squid Game from Korea, or Japan's Alice in Borderland (something worth watching)
Netflix's investment in local content has been helping drive its results, as international revenue growth has been outpacing U
This continued in Q2, considering recent developments
Moreover, Asia-Pacific growth led the way, with revenue climbing 24% to $1. 3 billion, while EMEA (Europe, Middle East, & Africa) revenue jumped 18% to $3
Latin American revenue rose 9% to $1. 3 billion, but was up 23% in local currencies
Furthermore, And Canada revenue, meanwhile, grew 15% to $4
Netflix's overall revenue rose 16% to $11. 08 billion, which was just ahead of the $11 (noteworthy indeed). 07 billion analyst consensus, as compiled by LSEG
Earnings per (EPS) soared 47% to $7
Moreover, 19, surpassing the $7. 08 analyst consensus
Most of Netflix's revenue growth currently appears to be coming from price increases and membership additions
Furthermore, However, growing its ad is a priority
Additionally, Its ad revenue is expected to double this year, and it recently rolled out its new ad platform to all of its ad, in today's financial world
The company also continues to expand its gramming, including boxing matches and two scheduled NFL games on Christmas
However, The evidence shows also has weekly gramming through its broadcast of WWE's Monday Night Raw, given the current landscape
Looking ahead, Netflix guided for Q3 revenue to climb 17% with a 31% operating margin
The evidence shows said its second-half operating margin will be lower than the first half due to higher content amortization and sales and marketing costs related to its larger second-half content slate (fascinating analysis), in today's financial world
However, For the full year, it raised it revenue guidance, taking it to a range of $44
Furthermore, 8 billion to $45, in this volatile climate
However, 2 billion, up from a prior outlook of between $43 (which is quite significant). 5 billion to $44
It also increased its operating margin outlook from 29% to 30%
Currency rates are responsible for half the operating margin increase
Image source: Getty Images
Should investors buy the pullback
Netflix stock had a strong year leading up to earnings, so expectations were high (which is quite significant)
Moreover, The company turned in solid results and boosted its outlook, although that was not enough for investors to continue to push the stock higher, given current economic conditions
Nevertheless, 6% after the report
Moreover, That said, nothing has fundamentally changed with Netflix's story
Conversely, The company is still benefiting from price increases, while its membership numbers continue to grow, especially in international
On the other hand, Moreover, Meanwhile, advertising should become the company's largest growth driver over time when its ad-tiered plans and content gain more scale (something worth watching)
However, with the stock trading at a forward price-to-earnings ratio (P/E) of 47 times analyst estimates for 2025, even after the pullback, I would not be a buyer at current levels, given current economic conditions
Moreover, I think the stock has solid potential over the long term, but I'd still want a cheaper valuation before I hop on board, given the current landscape
The Author Geoffrey Seiler is a contributing Stock Market Analyst at The Motley Fool covering publicly traded companies in nology, consumer goods, healthcare, energy, and materials sectors
Moreover, Prior to The Motley Fool, Geoffrey was a senior equity analyst at Raging Capital Management, a $600 million long-short hedge fund
However, He holds a B
In History from Haverford College
Fun fact: Geoffrey is a world traveler, having visited over 35 countries on five continents, considering recent developments
However, TMFFindfit Geoffrey Seiler has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Netflix
The Motley Fool has a disclosure policy.
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