Netflix Has Fallen More Than 40% 7 Times in Its History. Here's What Happened Next Each Time.

Key Points

• The streaming giant’s stock has seen enormous volatility over the years since its initial public offering in 2002.

• Shares have climbed 16% in the past five weeks, as investors may find the current valuation too good to pass up.

• Netflix faces much slower growth prospects now than it did in the past, adding fuel to the bear case.

• 10 stocks we like better than Netflix ›

Over the past five weeks, the market has pumped some life into Netflix (NASDAQ: NFLX). Shares of the entertainment powerhouse have soared 16% (as of Aug. 27). But this doesn’t take away from the negative perception surrounding the business.

This streaming stock currently trades 40% off its record from June 2025. This isn’t uncharted territory. Long-time investors understand how wild the roller-coaster ride has been. In fact, Netflix has seen its share price fall more than 40% on seven total occasions, including the current drawdown, since its initial public offering (IPO) in May 2002.

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With the shares putting up a mind-boggling trailing-20-year return of 29,700% and the company sporting a significant market capitalization of $332 billion, Netflix obviously bounced back. But it’s important for investors to look at history to guide their thinking about what might come next for the stock.

Image source: The Motley Fool.

The same old song

This stock isn’t protected from some pretty serious bouts of volatility. Less than five months after the IPO, Netflix shares tanked 71% from a fresh all-time high. They then went on to skyrocket 725% over the following 12 months.

The stock fell by 64% from January 2004 to the end of August that year. During the subsequent year, it climbed 55%. Just days before Halloween in 2008, Netflix shares were down by 56% from a record high reached just more than six months earlier in April. They more than tripled in the 12 months after.

Netflix’s worst performance started in early July 2011. The stock lost 82% of its value by the beginning of August 2012. It then surged 357% over the following year. Christmas of 2018 was not nice. Netflix shares dipped 44% during a more than five-month period of time before the holiday. By Christmas Eve of 2019, they had risen 42%.

From the end of October 2021 to early May 2022, the stock fell 76%. It proceeded to register a 107% gain over the next 12 months.

It goes without saying that the investment community reacts to negative news or the anticipation of difficult times ahead. That’s how the stock market works. During each of the 40% (or more) drops Netflix experienced in the past, there was something that caused fear, uncertainty, and doubt.

In 2004, direct competitor Blockbuster Online engaged in a price war with Netflix. In 2011, it was the failed Qwikster strategy that tried to split the streaming service from the DVD-by-mail service. In 2022, the business reported a surprise subscriber decline, which resulted in a rapid deterioration in market sentiment.

Over the subsequent year after Netflix shares fell 40% or more historically, they averaged a positive return of 248%. Is this the kind of performance investors should wait patiently for as we look to 2027?

This time could be different

History doesn’t always repeat. However, it does rhyme. Investors should adopt this perspective when it comes to Netflix. Don’t expect the current drawdown to eventually play out like past declines. Don’t believe that the outcome will be drastically different, either.

Right now, Netflix leans more toward being a value stock. It trades at a forward price-to-earnings ratio of 25.8. From a historical point of view, shares are usually never this cheap.

Before you rush to invest, though, consider the current state of the business. Competition has arguably never been so intense. It’s a battle for eyeballs and attention, with platforms like Alphabet‘s YouTube and Meta Platforms‘ Instagram thriving with respect to engagement, especially on mobile devices.

Netflix isn’t going to report the same level of growth it did in the past. So, the one critical factor that drove the stock’s incredible gains historically is becoming less of a catalyst. It’s impossible to know what the coming 12 months will bring for shareholders.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Netflix. The Motley Fool has a disclosure policy.