Jul. 19 at 7:25 AM
$NFLX This decline looks like partly justified repricing because investors (not traders) reduced the valuation they are willing to pay for slower expected growth. However, if the business continues producing around
$51 billion in annual revenue, maintains high operating margins, grows advertising, and continues returning capital through buybacks, there is a reasonable argument that the market could eventually conclude it overreacted.
The key question over the next few quarters isn't whether Netflix remains profitable—it almost certainly does. The question is whether it can convince investors (not traders) that it still deserves a premium growth multiple. If the business performs better than today's expectations, what currently looks like a justified repricing could, in hindsight, be viewed as a temporary dislocation.
