Netflix (NASDAQ:NFLX) is a name I’ve never held in my Stocks and Shares ISA. Looking back, that’s a shame, as its share price has zoomed around 600% higher over the past decade.
Impressively, this return stands even after a near-50% crash in the past 13 months. The last time Netflix had this sort of epic meltdown was between November 2021 and April 2022, when the peak-to-trough decline was 72%.
Yet anyone who invested at those lows has since made blockbuster returns, even after the recent collapse. So should I add this out-of-favour S&P 500 stock to my ISA?
The growth story’s lost fizz
As the undisputed titan of global streaming, I’m sure Netflix needs no backstory. Even your elderly relatives are likely familiar with the brand nowadays.
But is that part of the problem? I mean, the company’s stopped reporting membership growth as a key metric because it’s less flattering than it used to be.
After its second quarter report last week, Netflix stock dropped 7.3%. While earnings per share of $0.80 beat estimates (just), on revenue of $12.6bn (up 13%), the streamer trimmed the top end of its 2026 revenue guidance by $300m.
It now expects between $51bn and $51.4bn, which would represent a solid top-line increase of about 13.5%. Still, the growth story arguably lacks a bit of excitement nowadays, causing some investors to tune out.
Are attention spans shrinking?
Another thing that irked Wall Street was that management said it will publish less data on customer engagement, starting in 2027. Some have speculated that this might be because those metrics are also becoming less flattering.
According to Bloomberg data, Netflix is suffering from a season-two curse (or ‘sophomore slump’). Basically, viewing figures for the second season (S2) of many popular shows are falling off a cliff (some losing as much as 70% of their audience).
- Beef (S2): -70%.
- Avatar: The Last Airbender (S2): -59%.
- The Four Seasons (S2): -63%.
- The Night Agent (S2): -50%.
Is Netflix losing its touch? Or are people simply losing interest due to multi-year gaps between seasons?
Viewer fatigue could also be a problem, with Apple, Amazon, Disney, HBO and others all releasing similar content. Speaking personally, I recently cancelled my Netflix subscription because I hadn’t watched anything for weeks.
Now that could be a seasonal thing, with the World Cup having aired for weeks and warmer weather continuing. Perhaps I’ll be back binge-watching on Netflix when the dark nights set back in. But it does give me pause for thought.
More fundamentally, I worry that people’s attention spans are shrinking from daily exposure to short-form video on social media. It seems Netflix might be worrying too, as they’ve started experimenting with shorter content.
Could TV disruptor-in-chief Netflix be in the early days of being disrupted itself?
My move
I see no evidence of this yet in the figures. Netflix’s fundamentals remain rock-solid, and it’s still tracking towards its 2030 target of almost $80bn in revenue, supported by substantial digital advertisement growth.
Moreover, the valuation looks more attractive than before (perhaps ever). For 2027, the forward-looking earnings multiple is just 18, which is a massive historical discount.
As tempting as this is, I need more convincing about Netflix’s ability to deliver its next chapter of growth. I’m not ready to invest yet.
Should you invest £5,000 in Netflix right now?
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Ben McPoland has no position in any of the companies mentioned.
