Netflix (NASDAQ:NFLX) latest earnings release yesterday hit the market with a resounding thud. The company’s share price is down in the high single digits in the pre-market trading.
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In a sense, the plummeting share price is a bit unexpected. By the numbers, things seem to be clicking.
For Q1 2026, Netflix brought in $12.25 billion in revenue, a 16.2% increase year-over-year, which comfortably easing past analyst projections. The company increased operating income at an even faster clip of 18%, and it also reiterated its 2026 revenue projections of $50.7-$51.7 billion and an operating margin of 31.5%.
And yet, the share price is sinking. Netflix had been on a solid run over the past few weeks, as investors rewarded the company for walking away from its proposed acquisition of Warner Bros. Discovery.
While he appreciates this “thriving” company, top investor Daniel Sparks also sounds a word of caution.
“In the context of the stock’s high valuation, there are some things to be concerned about. In fact, I’d argue that a case can be made for the stock falling as much as 30% more from here,” states the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.
Sparks is worried about the very real possibility that Netflix will continue to experience slowing rates of revenue growth. He notes that revenues in Q4 2025 grew by 17.6%, a notch above the 16.2% the company just delivered.
Moreover, Netflix is projecting year-over-year revenue growth of 13.5% for Q2 2026, perhaps reflecting an additional drop in momentum. That’s not a good sign, according to the investor.
“For a stock with a very high valuation, this clear deceleration is arguably a cause for concern,” adds Sparks.
To justify its premium price, the investor believes that Netflix must maintain its dominant position in the streaming wars. And that’s not such a straightforward proposition in today’s environment, especially as deep-pocketed competitors expand into live sports and add first-class content.
Though he doesn’t agree that now’s the time to head for the exits, Sparks also isn’t so sure that this is the opportune moment to jump in with both feet as a multiple contraction could be in the offing.
“Wait for a better entry point,” he sums up. (To watch Sparks’ track record, click here)
Wall Street has a significantly more bullish point of view. With 30 Buys and 9 Holds, NFLX enjoys a Strong Buy consensus rating. Its 12-month average price target of $115.55 points to additional gains up ahead. (See NFLX stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.