Query: How would you’re feeling in case you owned Netflix inventory (NASDAQ:NFLX) and it crashed 60%, and even 70%, within the subsequent couple of months? Sounds excessive? It’s occurred earlier than – and it might occur once more. Netflix has remained roughly flat this 12 months after a stellar 2024, which noticed the inventory achieve roughly 90%, led by Netflix’s crackdown on password sharing and the growth of its advertising-supported streaming plan. Nevertheless, we see a number of dangers for the corporate within the close to time period given mounting macroeconomic issues within the U.S., following President Donald Trump’s imposition of tariffs on key buying and selling companions and likewise attributable to presumably decrease subscriber additions for Netflix. We consider the inventory might fall additional to ranges of underneath $300 per share. Right here’s why buyers must be involved.
Right here’s the factor: in a downturn, NFLX inventory might lose significantly. There’s proof from as lately as 2022 that NFLX inventory misplaced over 70% of its worth within the matter of only a few quarters. So, might NFLX’s roughly $870 inventory slide to underneath $300 ranges if a repeat of 2022 have been to occur? Now, after all, particular person shares are extra unstable than a portfolio – and on this setting, in case you search upside with much less volatility than a single inventory, contemplate the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns better than 91% since inception.
Why Is It Related Now?
Netflix’s subscriber development might sluggish in 2025 as key initiatives just like the password-sharing crackdown and ad-supported plans have already been rolled out throughout main markets. These methods seemingly pulled ahead demand from future years, doubtlessly resulting in muted subscriber additions forward. The corporate’s choice to cease reporting subscriber numbers beginning in 2025 may point out that Netflix anticipates slower development in its subscriber numbers. See what to expect from Netflix in 2025. Via 2024, Netflix added over 40 million subscribers, bringing its paid subscriber base near 302 million. This growth was a serious driver of the corporate’s inventory value positive aspects.
Development was fueled by measures to curb password sharing, requiring customers to pay for extra sharing choices or create new accounts. This initiative, now energetic in over 100 international locations, helped Netflix each appeal to new subscribers and higher monetize current ones. Moreover, the ad-supported tier, providing a extra inexpensive entry level, has seen sturdy adoption, with over half of latest subscribers in eligible areas selecting this plan as of the newest quarter. Nevertheless, with these development levers now largely used up, Netflix could face headwinds in sustaining its momentum, which might influence the efficiency of the inventory.
Financial uncertainty might additionally weigh on Netflix, which is very depending on client spending. Trump’s daring strikes on tariffs, together with a 20% complete tariff on Chinese language imports and 25% on Canada and Mexico, in addition to tighter restrictions on immigration, have stoked fears that inflation might return. All of this implies the U.S. financial system might hit a tough spot, and even worse, hit a recession – our analysis here on the macro picture. On Monday, throughout an interview, the President refused to rule out the suggestion that new tariffs might set off a recession, inflicting the Nasdaq index to say no by 4%.
When factoring in heightened uncertainty from the Trump administration’s insurance policies, these are vital dangers. The continuing Ukraine- Russia struggle and international commerce tensions additional cloud the outlook. Tariffs drive up import prices, main to cost hikes, decrease disposable earnings, and weaker client spending. It is a clear adverse for Netflix, which depends on discretionary earnings. It additionally doesn’t assist that Netflix plans have develop into costlier, with its premium plan now priced at $25 monthly and the usual HD plan lately growing by $2.50 to $18 monthly. This might result in subscriber pushback or slower new sign-ups. On the identical time, Netflix’s content material prices are set to rise because it ventures into dwell sports activities programming, reminiscent of NFL video games and WWE wrestling. Moreover, rising competitors might result in larger churn charges or a slowdown in new sign-ups, impacting margins. These mixed pressures might weigh on profitability and inventory efficiency within the close to time period.
How resilient is NFLX inventory throughout a downturn?
NFLX inventory has seen an influence that was barely higher than the benchmark S&P 500 index throughout a number of the latest downturns. Fearful concerning the influence of a market crash on NFLX inventory? Our dashboard How Low Can Netflix Inventory Go In A Market Crash? has an in depth evaluation of how the inventory carried out throughout and after earlier market crashes.
Inflation Shock (2022)
• NFLX inventory fell 72.1% from a excessive of $597.37 on 3 January 2022 to $166.37 on 11 Could 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The inventory totally recovered to its pre-Disaster peak by 27 February 2024
• Since then, the inventory has elevated to a excessive of $1,058 on 17 February 2025 and at present trades at round $890
Covid Pandemic (2020)
• NFLX inventory fell 22.6% from a excessive of $386.19 on 19 February 2020 to $298.84 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The inventory totally recovered to its pre-Disaster peak by 13 April 2020
World Monetary Disaster (2008)
• NFLX inventory fell 55.9% from a excessive 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 inventory totally recovered to its pre-Disaster peak by 17 March 2009
Premium Valuation
On the present inventory value of just about $870 per share, Netflix trades at round 35x consensus 2025 earnings, which seems a bit costly in our view. Compared, the inventory was buying and selling at about 20x earnings again in mid-2022. Though Netflix’s latest monetary efficiency has been sturdy, markets are usually short-sighted, extrapolating short-term successes for the long term. In Netflix’s case, the idea is probably going that the corporate will proceed its sturdy streak of subscriber additions and sure develop revenues comfortably at double digits. Nevertheless, there’s an actual chance that Netflix will quickly see subscriber development cool, as the dual good thing about the password-sharing crackdown and ad-supported tiers finally stabilize, with financial uncertainty additionally rising within the U.S.
Given this potential development deceleration and the broader financial uncertainties, ask your self the query: do you wish to maintain on to your Netflix inventory now, will you panic and promote if it begins dropping to $300, $250, and even decrease ranges? Holding on to a falling inventory is rarely straightforward. Trefis works with Empirical Asset Administration — a Boston space wealth supervisor — whose asset allocation methods yielded optimistic returns in the course of the 2008-09 interval when the S&P misplaced greater than 40%. Empirical has included the Trefis HQ Portfolio on this asset allocation framework to offer shoppers higher returns with much less threat versus the benchmark index, much less of a roller-coaster journey, as evident in HQ Portfolio efficiency metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Complete [2] |
| NFLX Return | -9% | 0% | 620% |
| S&P 500 Return | -6% | -5% | 151% |
| Trefis Bolstered Worth Portfolio | -4% | -5% | 643% |
[1] Returns as of three/11/2025
[2] Cumulative complete returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
