Netflix Stock To $500?

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Netflix stock (NASDAQ:NFLX) has been a stellar performer, nearly doubling over the last 12 months to levels of about $1,270 currently. The rally has been driven by the company’s crackdown on password sharing and the expansion of its advertising-supported streaming tier. Momentum has clearly been on Netflix’s side, and Q2 results published yesterday exceeded expectations, with the top line growing 16%. However, we believe the stock faces considerable downside risk at these elevated levels. With mounting macroeconomic uncertainty and signs that subscriber growth could slow, investors may be underestimating potential risks. In our view, the stock could fall significantly – possibly dropping below $500 per share. A 50% to 60% correction may sound extreme, but it wouldn’t be unprecedented. It has happened before, and could very well happen again.

In a downturn, NFLX stock could lose considerably. There is evidence from as recently as 2022 that NFLX stock lost over 70% of its value in the matter of just a couple of quarters. So, could NFLX’s roughly $1,270 stock slide to under $500 levels if a repeat of 2022 were to happen? Now, of course, individual stocks are more volatile than a portfolio – and in this environment, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Why Is It Relevant Now?

Netflix’s subscriber growth could eventually slow, as key initiatives like the password-sharing crackdown and ad-supported plans have already been rolled out across major markets. These were major strategic shifts aimed at unlocking new revenue streams and expanding the user base after growth plateaued post-pandemic. However, they likely pulled forward demand that might have otherwise materialized over the next few years. This might result in softer subscriber additions going forward. The company’s decision to stop reporting subscriber numbers starting in 2025 could also signal internal expectations of slower growth.

In 2024 alone, Netflix added over 40 million subscribers, pushing its paid user base to nearly 302 million as of the end of 2024, a record annual increase that significantly contributed to the stock’s rally. Growth was largely driven by its measures to curb password sharing, which encouraged users to either pay for extra member access or sign up for new accounts. This initiative, now active in more than 100 countries, helped Netflix improve monetization while boosting sign-ups. Meanwhile, the ad-supported tier has gained strong traction, with Netflix indicating last quarter that it had over 94 million ad supported users. However, with these growth levers now largely used up, Netflix may face headwinds in sustaining its momentum, which could impact the performance of the stock.

Economic uncertainty, higher costs could also weigh on Netflix, which is highly dependent on consumer spending. The imposition of tariffs on key trading partners is already causing U.S. inflation to pick up. This could lower disposable income, and potentially weaken consumer spending. This could be a negative for Netflix, which relies on discretionary income. It also doesn’t help that Netflix plans have become more expensive, with its premium plan now priced at $25 per month and the standard HD plan recently increasing by $2.50 to $18 per month. This could lead to slower new sign-ups. At the same time, Netflix’s content costs are set to rise as it ventures deeper into live sports programming, such as NFL games and WWE wrestling, that may involve higher production costs and licensing expenses. While Netflix saw margins rise in Q2, it warned that operating margins over the second half of 2025 could trend lower due to higher content amortization and rising marketing costs associated with its content slate.

How Resilient Is NFLX Stock During A Downturn?

NFLX stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on NFLX stock? Our dashboard How Low Can Netflix Stock Go In A Market Crash has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• NFLX stock fell 75.9% from a high of $691.69 on 17 November 2021 to $166.37 on 11 May 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 August 2024
• Since then, the stock has increased to a high of $1339.13 on 30 June 2025 and currently trades at around $1,270

Covid Pandemic (2020)

• NFLX stock fell 22.9% from a high of $387.78 on 18 February 2020 to $298.84 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 13 April 2020

Global Financial Crisis (2008)

• NFLX stock fell 55.9% from a high of $5.81 on 17 April 2008 to $2.56 on 27 October 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 17 March 2009

Premium Valuation

At the current stock price of $1,270 per share, Netflix trades at around 50x consensus 2025 earnings, which appears expensive in our view. In comparison, the stock was trading at levels of around 20x earnings back in mid-2022. Although Netflix’s recent financial performance has been strong, markets tend to be short-sighted, extrapolating short-term successes for the long run. In Netflix’s case, the assumption is likely that the company will continue its strong streak of subscriber additions and likely grow revenues comfortably at double digits. However, there’s a real possibility that Netflix will soon see subscriber growth cool, as the twin benefit of the password-sharing crackdown and ad-supported tiers eventually stabilize, with economic uncertainty also growing in the U.S. Consensus estimates also point to just about 12%-13% growth over 2025 and 2026.

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