Netflix shed roughly 10 percent Tuesday after a big miss on subscriber growth, on pace for the stock’s worst day in two years.
But the stock has a history of big rebounds.
Shares of Netflix fell by at least 10 percent on 13 occasions in the last decade, according to a CNBC analysis of Kensho data. On five of those occasions, shares tanked by more than 15 percent. The stock’s largest single-day drop in that period came on October 25, 2011 when the stock shed nearly 35 percent after an earnings report.
But for more than half of those disastrous trading days, Netflix closed in the green on the following day, week and 3-month period, according to the Kensho data.
For the 13 incidents of a 10-plus percent drop in the last decade, Netflix posted an average gain of 0.2 percent the week after and an average gain of 12 percent three months later.
GBH Insights analyst Dan Ives called Monday’s subscriber miss and subsequent hit to share price a “speed bump” for Netflix in a note to investors after the company’s second quarter earnings report. Wall Street called it a “compelling” buying opportunity and refuted that the report would change the investment thesis.
The full recovery may not be immediate if the trend holds up — Netflix posted an average decline of 2 percent in the month following its 13 biggest drops of the last decade, according to CNBC’s analysis of Kensho data. But Netflix needs another rebound if it wants to hang onto its high-priced valuation and continue its massive content spend. And if history is any indication, it’ll get it.
Netflix history is filled with big stock declines – like today – followed by bigger rebounds