NFLX fundamentals are strong (margins, ads) but growth is slowing; technically bearish until price recovers above $76-$77.

Today, we're going to take another look at Netflix . As you know, Netflix is one of the world’s largest entertainment companies that distributes TV series, movies, documentaries, games, and increasingly live programming to more than 190 countries around the world.

The traditional business model relies on subscriptions , but Netflix now has a growing ad-supported category that gives the company a second major source of income.

The bigger story is that Netflix is evolving beyond traditional on- demand streaming to become a broader global entertainment platform that includes written content, live sports such as wrestling (WWE) and boxing, gaming, video podcasts, and advertising.

The company now reaches an audience approaching one billion people, giving Netflix a massive worldwide distribution reach.

Therefore, Netflix is competing not only for subscriptions, but also for consumer attention, advertising revenue, premium content, and rights to live sports broadcasting agreements.

From a unique value perspective, Netflix's biggest competitive advantage is its combination of global distribution, content volume, and technology. The company can produce a program in one country and turn it into a global success almost instantly , allowing Netflix to spread the costs of the content over a very large international audience.

Its recommendation technology is also a key differentiating factor. Netflix uses viewing data and artificial intelligence to improve content recommendations, search, advertising, and increasingly, some production workflows.

This gives Netflix an advantage not only in discovering content , but also in how it is created, distributed, and profited from.

Back on July 16 of this year, the company announced another strong second quarter of results , with revenues of approximately $12.56 billion, a 13% year-over-year increase. Operating income reached approximately $4.2 billion, an increase of nearly 11%, while the operating margin remained very strong at 33.4%.

On a diluted basis, earnings per share were around 80 cents, but the main issue with price action is not necessarily profitability, but rather the rate of growth. In fact , revenue growth is slowing despite exceeding expectations, from around 18% late last year to low double digits currently.

Management's forecast for the third quarter points to another slight slowdown .

For the entire year of 2026, Netflix is projecting revenues of between $51 billion and $ 51.4 billion, representing annual growth of approximately 13 to 14%. At the same time, operating income is expected to increase by more than 20%.

Therefore, despite the slowdown in revenue growth, profitability continues to expand at a faster pace than sales. This is important for the price. Advertising remains one of Netflix's most important growth drivers .

The company generated more than $1.5 billion in advertising revenue in 2025 alone, and management expects that figure to double in 2026 to nearly $3 billion. Live programs represent another emerging opportunity.

Netflix recently decided not to increase its offer to acquire Warner Bros. after management concluded that a higher price no longer made any financial sense at all.

This decision reduced the risks of an acquisition merger and allowed Netflix to focus on organic sales and share buybacks, while taking advantage of a contract termination fee of approximately $2.8 billion.

Now, let's look at some of the other positives of the company. Netflix now offers events such as NFL games, WWE, boxing, and select baseball programs, attracting new subscribers and creating a premium advertising inventory.

The company remains one of the most profitable businesses in the global entertainment industry. If you look at the operating margins, they exceed 30 % and profits are growing faster than revenues.

Again, this is important in relation to how the stock price movement develops.

Advertising provides a second important growth engine. Meanwhile, sports and live events give Netflix additional ways to attract subscribers and advertisers.

As mentioned, the company maintains a huge global distribution and strong pricing power . They can generate increasing revenue from the same audience through subscriptions, advertising, pricing , and live events, which will support profit growth even if traditional membership growth begins to slow.

Finally, to support the share price, the company resumed aggressive share buybacks, adopting an additional $ 25 billion buyback program , which is becoming increasingly important as the stock trades well below its previous record highs.

From a valuation perspective, with a share price around $70 to $71, the market capitalization is approaching $300 billion. The stock is trading at approximately 19.4 times future earnings, compared to the sector average of around 13 times.

So, Netflix is still trading at a price premium compared to the broader sector.

However, this multiple is significantly lower than the company's 5-year average of approximately 35 times earnings . Future revenue growth is also around 13.5%, while earnings before interest, taxes, depreciation and amortization growth is around 22%.

Again, this difference is important because it shows that Netflix is growing profits faster than revenues thanks to operating leverage.

The valuation question is whether the price-to- earnings ratio of around 19 actually reflects a slowdown in revenue growth, or whether improved profitability will ultimately justify this higher multiple.

Now , let's also address some concerns regarding Netflix. First , as we mentioned earlier, the biggest concern is the slowdown in growth. Revenues remain strong, but are no longer accelerating.

Well, the growth in total viewing hours was also relatively modest. This means that Netflix is increasingly relying on pricing power, advertising, and improved monetization to increase revenue at a faster pace than engagement.

Competition remains fierce, especially from YouTube, Amazon, Disney and the expanded Paramount Warner entity.

Live sports can also increase the risks, because sports broadcasting rights can be extremely expensive. Therefore, Netflix needs to prove that acquiring and retaining subscribers, and the advertising revenue generated from these events, can justify the higher costs of the content.

Good. Now, let's take a look at the technical situation of " Netflix". As you can see in the chart, the technical situation is still weak. The stock has underperformed the S &P 500 over the last 50 trading days and remains below its declining 50- and 200-day moving averages , confirming a broader downtrend.

Trading volume was also higher on the days of the decline , indicating that the stock is still in a distribution phase and not an accumulation phase. The daily Relative Strength Index is around 46, while the MACD indicator remains essentially flat, indicating a slowing of the downward momentum, but there is no confirmation of a trend reversal yet.

On the weekly chart, the Relative Strength Index remains weak at around 40, although the MACD indicator has started to improve. Therefore, Netflix may attempt to build a bottom, but the chart remains negative until the stock can recover to levels of approximately $76 to $77 , which is above the 50- day moving average, followed by the more significant $83 to $87 level, which represents resistance from early September.

In short , Netflix remains one of the most powerful companies in the global entertainment industry . Revenues continue to grow at a double-digit rate, operating margins are high at over 30%, and advertising has become an important and growing second source of income.

Live programming is also expanding Netflix's reach beyond traditional on- demand streaming, while the decision to move away from Warner Bros. has demonstrated financial discipline, allowing the company to focus on organic growth and share buybacks.

The challenge facing the company is that growth is slowing down, while competition continues to intensify.

Therefore, the question of investing moving forward is clear and straightforward. Has the stock already priced in the slowdown in revenue growth and the reaction? Or does this technical weakness indicate that Netflix's competitive advantage is beginning to shrink?