Netflix is not a broken company and trades at just 19x earnings. Jim Cramer says start buying

Jim Cramer used his Tuesday, July 20, CNBC Mad Money segment to defend Netflix (NASDAQ:NFLX) after a punishing post-earnings sell-off, telling viewers the streamer's slide into the high-$60s makes the stock worthy of a closer look.

"This is not a broken company. It's one of the best companies around with one of the best products, and the numbers are still better than most," Cramer said, framing the stock's 19x forward earnings multiple as an entry point patient investors have been waiting for.

Netflix shares are down 8.44% over the past week, 12.64% over the past month, and 44.1% over the past year, closing Tuesday at $68.67. That's a sharp reset from levels near $95.55 at the start of April.

Netflix Beat Estimates, but Investors Still Sold the Stock

Netflix's Q2 2026 report on July 16 delivered EPS of $0.80 versus the $0.7883 estimate on revenue of $12.56 billion, up 13.37% year over year, with an operating margin of 33.4%. Growth was broad-based, with Latin America up 21%, Asia Pacific up 16%, EMEA up 14%, and North America up 10%. Netflix narrowly missed on Wall Street's revenue expectations.

However, Netflix fell from $73.985 at the filing to $68.20 within an hour. Cramer conceded the quarter was a disappointment with a weakening content slate, but pushed back on the idea that the company is now fundamentally broken.

Netflix’s Advertising Revenue Could Double to $3 Billion

Cramer shared Netflix's bull case based on an uptick in advertising revenue. "Advertising revenues should roughly double to $3 billion this year, and management believes the gap between the economics of the ad-supported and the ad-free plans is narrowing," he said, pointing to a gap now under 45%. On the earnings call, co-CEO Gregory Peters described that closing gap as "near-term, unrealized revenue growth" the company can harvest.

The Company Captures Only 5% of Global Television Viewing

Then came the runway argument. "Penetration of its addressable broadband households captures only about 7% of the entertainment revenue available in those markets, and accounts for just about 5% of global television viewing, so there's still plenty of room for growth," Cramer said. CFO Spencer Neumann noted Netflix is approaching 1 billion people in audience with household penetration under 45% of ~800 million addressable households.

Netflix Repurchased a Record $4.7 Billion of Stock

Additionally, Netflix repurchased $4.7 billion of stock in Q2, its largest buyback quarter ever, with roughly $27 billion in remaining authorization after April's $25 billion refresh. Cramer characterized it as one of the largest corporate buyback programs in America, alongside investments across ads, games, live programming, podcasts, sports, and AI.

Cramer Says Buy a Small Position and Add “Pyramid Style”

Cramer advocated for interested investors to start a small position and scale up over time. "I'd put a small position here and then gradually add on to weakness in pyramid style, because I wouldn't be surprised if the weakness sticks," he said.

Polymarket's active weekly market assigns roughly 81% probability that NFLX closes the week of July 20-24 in the $60-$70 range, and the July monthly market puts the highest conviction at $65 with 0.405 probability.

Reddit sentiment mirrors the split Cramer is trying to bridge. Aggregate sentiment scores dropped to 24 on Monday afternoon, while a widely upvoted r/stocks thread titled "Netflix beat earnings, did its biggest buyback and then restricted access to its engagement data and fell 12% through two days" captured the frustration. Wall Street's average analyst price target sits at $97.91 with 37 Buy and 13 Hold ratings, which represents significant upside from the stock's current price of $68.67.

What To Watch

Cramer believes Netflix’s sell-off has created an attractive entry point, but he cautioned that the stock could remain weak in the near term. His strategy is to start with a small position and gradually buy more if shares continue to fall.

The bull case now depends on Netflix doubling advertising revenue to $3 billion, restoring engagement growth, and meeting its Q3 guidance. If the company delivers, its global growth runway, record share repurchases, and 19x forward earnings multiple could make the current decline a long-term buying opportunity.

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