Prediction: Netflix Stock Is Going to Soar After July 16

Netflix (NFLX +4.77%) operates the world's largest streaming platform for movies and television shows, with over 325 million paying members. Its stock is currently down 46% from its all-time high, as investors weigh an increasingly competitive landscape and the recent departure of the company's co-founder Reed Hastings, who was serving as the chairman of the board.

Netflix is now trading at a very attractive valuation, especially in light of its strong revenue and earnings. The company will release its operating results for the second quarter of 2026 (ended June 30) on July 16, and here's why I think the report will spark a recovery in its stock.

Image source: The Motley Fool.

Netflix investors will get an update on the booming advertising business on July 16

To maintain its spot at the top of the streaming industry, Netflix outspends most of the competition to create and license content. But it also focuses heavily on reaching the broadest possible audience, which is why it offers three subscription tiers with vastly different prices. The cheapest one, which is supplemented by advertising, has become the platform's primary growth engine over the last couple of years.

The Netflix ad-tier subscription sells for $8.99 per month in the U.S., so it's much cheaper than the Standard ($19.99 per month) and Premium ($26.99 per month) tiers. But unlike members of the other two tiers, ad-tier subscribers have the potential to become more valuable over time, because Netflix can charge higher prices for advertising slots as the user base grows.

Plus, Netflix is investing heavily in live programming across boxing, Major League Baseball (MLB), World Wrestling Entertainment (WWE), and the National Football League (NFL), where ad slots command a premium.

Expand

NASDAQ: NFLX

Netflix

Today's Change

(4.77%) $3.54

Current Price

$77.73

Key Data Points

Market Cap

$327B

Day's Range

$74.92 - $78.43

52wk Range

$70.86 - $129.50

Volume

2M

Avg Vol

41.6M

Gross Margin

49.44%

During the 2026 Q1 (ended March 31), the ad tier accounted for 60% of all new signups in countries where it's available, so it's resonating with consumers. Netflix also ended the quarter with 4,000 advertising partners, a whopping 70% growth compared to the year-ago period, so businesses are also very interested.

Management's latest guidance suggests Netflix's advertising revenue will double to $3 billion during 2026 after more than doubling last year. It will only make up a tiny portion of the company's expected $51 billion in total revenue for this year, but it will be a significant part of the business in the future if it continues to grow at the current pace.

In any case, the ad business has a ton of momentum right now, and investors will receive an update on its progress when Netflix releases its Q2 operating results on July 16.

Netflix stock is rarely this cheap

Netflix is highly profitable, which separates it from many other streaming companies. During Q1, the company's earnings surged by 86% year over year to $1.23 per share. Management's guidance suggests growth likely moderated during Q2, primarily because the content amortization rate from April to June was expected to be the highest of the year. In other words, Netflix likely recognized a disproportionate amount of its annual costs in Q2.

Nevertheless, Netflix stock is trading at a very attractive level heading into the July 16 report. Based on the company's trailing-12-month earnings of $3.10 per share, its stock has a price-to-earnings (P/E) ratio of just 23.7, which is a massive discount to its five-year average of 40.9.

Moreover, it makes Netflix cheaper than both the S&P 500 and Nasdaq-100 indexes, which trade at P/E ratios of 25 and 34.1, respectively.

NFLX PE Ratio data by YCharts.

Based on Wall Street's average earnings estimate for 2027 (provided by Yahoo! Finance), Netflix stock has a forward P/E ratio of just 19.1. That suggests the stock would have to soar 79% by the end of next year just to match the P/E ratio of the Nasdaq-100 (assuming it remains constant). That isn't unrealistic considering Netflix's P/E was above 30 for the majority of the last five years.

In my opinion, as long as Netflix's upcoming Q2 report shows continued momentum across its business, I think it could be the spark that ignites a recovery in its stock. Its attractive valuation lays the groundwork for significant potential upside from here.