Why Netflix stock just can't catch a break after earnings

The dreadful year for Netflix ( NFLX ) investors just keeps getting more dreadful.

A fresh sell-off on the day after a lackluster earnings report on Oct. 20 has persisted, with Netflix shares down about 7% in the past five trading sessions. The S&P 500 is relatively flat during this stretch.

Yahoo Finance AlphaSpace analysis shows Netflix shares trading at one of the lowest trailing 12-month P/E ratios in the past decade.

If price is truth in the stock market, then Netflix's slide reflects its truths. They include lost viewership to rival YouTube, a less-than-hot content slate this year, and a view on Wall Street that content spending will have to increase dramatically in 2027 to regain eyeballs.

The third quarter for Netflix reflected all of this and then some.

Netflix delivered a mixed third quarter earnings report, with earnings of $0.87 per share, beating Wall Street estimates of $0.82. Revenue of $12.87 billion came in line with analysts' expectations.

For the fourth quarter, Netflix forecast revenue of $13.44 billion, below then expectations of $13.57 billion. The company also cut its full-year advertising revenue outlook to about $2.7 billion from $3 billion previously.

"The US is also working," Netflix co-CEO Ted Sarandos told analysts on an earnings call. "It's just not growing as fast as it could or as fast as we'd like. We had some really solid doubles and triples this year. But the other territories count on some of those titles being home runs so that they'll travel around the world."

To reboot the bull case for the stock, Sarandos pushed the button on laying off 6% of the workforce. He sent well-regarded chief content officer Bela Bajaria packing in favor of former Disney ( DIS ) exec Peter Rice.

"2026 has been more of a transitional year than we envisioned. While the latest Ads miss is frustrating, we find comfort in Membership retention that is still healthy and corrective actions within content that can drive a potential re-acceleration in 2027E and into 2028E (which we are not modeling today)," KeyBanc analyst Justin Patterson said.

Follow Brian Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email him at brian.sozzi@yahoofinance.com.