Should You Buy Netflix Stock Before Oct. 20? History Has a Clear Answer.

Netflix (NFLX +2.89%) is set to release its third-quarter earnings report next week, and the stock faces a challenging outlook heading into the release. Over the past year, shares of the premium video service have declined by 40%, with momentum and expectations low ahead of the financials. Netflix's own guidance anticipates revenue growth of 11.7%, marking the weakest year-over-year increase in three years. Moreover, revenue growth is expected to decelerate for the third consecutive quarter.

Despite the gloomy outlook, history suggests that a stock can experience a rebound even after a significant decline in popularity. Netflix's own past experiences provide evidence of this trend. After the Qwikster fiasco in 2011, the stock plummeted by 83%, only to recover within two years. Additionally, Netflix faced a 77% drop from peak to trough in 2022, following a period when many growth stocks were crashing. However, the stock rebounded from that decline in just two years.

The present chart, showing Netflix's stock performance since the middle of last year, reveals a concerning pattern. There are five purple circles on the chart, each marking the date of one of the company's last five quarterly reports. Following each of those updates, Netflix's stock initially moved lower. The only exception was an early springtime rally, which occurred after the company broke its deal to acquire Warner Bros. Discovery and subsequently raised prices.

Despite the recent downward trend, Netflix has shown a history of bouncing back from significant declines. The longer-term trend appears more encouraging, indicating that the stock may recover after a period of consecutive earnings seasons where it experienced setbacks. Investors looking to capitalize on this opportunity may find value in Netflix's stock, even if the current outlook is not promising.