The market is dominated by investor sentiment. Fundamentals only matter as long as the market decides that they matter. For example, many tech stocks were loss-making in 2021, yet their share prices rocketed to stratospheric levels.
This year, investors decided that Netflix should be ‘cash flow positive’ and punished it for a loss in subscribers and not taking drastic action earlier. Investors are also spooked by the increased competition and a potential slowdown in consumer spending.
However, things have stabilised somewhat. Netflix’s top-line revenue by quarters did not crater. P&L continues to hum along. After such a drastic fall in share price, Netflix was oversold. Plus, Netflix is starting to introduce ads in its programs. This may increase income over time.
At the moment, the $140 billion company is neither overvalued (like it was back in 2021) nor undervalued.
Source: Netflix Inc