Netflix’s (NFLX) stock fell close to its 52-week low immediately after the company reported its second-quarter results on July 16. However, the performance doesn’t quite explain the drop. Revenue rose about 13% from a year earlier. Earnings beat the Wall Street consensus. Margins also held steady. Yet the stock sold off sharply after the report and has stayed near the bottom of its range since.
The trigger was the outlook. Netflix guided to slightly slower revenue growth next quarter, and after a few quarters of cooling numbers, that was enough to worry investors. While the slowdown is real, the company is still growing revenue at a double-digit pace. The market pricing the stock as though something has broken could be an overreaction.
