While the S&P 500 has nearly doubled since 2020, giants Netflix and Amazon have lagged behind in three of the last five years. Yet, beneath the surface, both companies are building unstoppable business momentum that Wall Street is underestimating. For patient investors, this divergence between stock performance and fundamental strength presents a rare entry point.
The Market’s Myopia: A Tale of Two Titans
Investor patience has been tested over a volatile five-year period. Since the end of 2020, the market has weathered a bear market in 2022 and a sharp sell-off in 2025. Despite this, the S&P 500 has delivered a total return of nearly 99%.
In stark contrast, Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN)—two of the most transformative companies of the last two decades—have underperformed the broader market in three of those five years. Their shares have only meaningfully outpaced the index in 2023 and 2024.
This underperformance creates a critical narrative gap. The market is often preoccupied with short-term sentiment, while long-term value is built on durable business fundamentals. For Netflix and Amazon, those fundamentals are not just intact; they are accelerating.
Netflix: From Subscriber Scare to Content Juggernaut
Netflix stock has climbed an astonishing 24,000% since its IPO, yet its recent history has been bumpy. Since December 2020, the stock is up approximately 80%, trailing the S&P 500’s 99% gain. The stock significantly underperformed in 2021, 2022, and again in 2025, where it has gained just 5% year-to-date compared to the index’s 17% rise.
The steep decline in 2022 was driven by a rare period of subscriber losses, causing the stock to plummet 51%. However, the company’s response exemplifies why it remains a formidable long-term bet.
- Subscriber Resurgence: Netflix aggressively tackled password-sharing and launched a lower-priced ad-supported tier, leading to a subscriber resurgence. The stock has surged 218% from its 2022 lows.
- Content Dominance: With over 300 million paying households across 190 countries, Netflix’s scale is unmatched. The potential acquisition of Warner Bros Discovery assets, including its film studios and HBO, could create an unparalleled content library.
- Profitability Powerhouse: Netflix generated $10 billion in net profit on $43 billion in revenue over the last year, funding massive content expansion. Analysts project revenue growth of 15% for 2025.
Wall Street consensus estimates point to annualized earnings per share growth of approximately 24% for the foreseeable future. This growth trajectory, coupled with a business that has proven its ability to adapt and dominate, makes the current stock price an attractive proposition.
Amazon: The Profitability Engine Is Just Warming Up
Amazon’s story is similar. A legendary wealth-builder over 20 years, its stock has only beaten the S&P 500 in two of the past five years, underperforming in 2021, 2022, and 2025 (up about 1% vs. the index’s 17%).
The market’s focus on Amazon’s core e-commerce business misses the bigger picture. While it is the global e-commerce leader, the company’s true value lies in its higher-margin ventures.
- Diversified Revenue Streams: Non-retail services—cloud computing (AWS), advertising, and Prime subscriptions—now account for 59% of revenue and the vast majority of profits.
- Accelerating Growth: Third-quarter 2025 sales grew 13% year-over-year to $180 billion, with acceleration in the highly profitable AWS segment being a key highlight.
- Cash Flow Monster: Amazon’s cash from operations has skyrocketed 229% over three years to over $130 billion on a trailing-12-month basis. Net profit reached $76 billion over the last year.
Despite this, the stock appears undervalued. It trades at a price-to-cash-flow ratio of 18, well below its 10-year average of 27. Its forward price-to-earnings ratio of 28 is reasonable for a company with analysts projecting 18% annualized earnings growth.
Connecting the Dots: Why This Time Is Different
The underperformance of Netflix and Amazon is not a signal of terminal decline. It is a symptom of the market repricing growth stocks in a higher interest rate environment and temporarily overlooking their evolved business models.
Both companies have successfully navigated their respective challenges:
- Netflix transformed a subscriber crisis into a growth catalyst with new monetization strategies.
- Amazon shifted from a low-margin retailer to a diversified tech and services powerhouse.
The core investment thesis remains robust: these companies possess immense competitive moats, global scale, and multiple levers for continued growth. The current valuations do not fully reflect the earnings power that is now being demonstrated.
The Investor’s Playbook: Assessing Risk and Reward
For investors, the key question is whether the recent underperformance is a buying opportunity or a warning sign. The evidence heavily favors the former.
The primary risks involve increased competition and regulatory scrutiny. However, the advantages of scale, brand loyalty, and technological infrastructure that Netflix and Amazon enjoy are nearly impossible for newcomers to replicate.
The reward potential is significant. History shows that buying high-quality companies during periods of temporary market disfavor has been a path to substantial wealth creation. With both stocks trading well off their highs despite dramatically improved fundamentals, the risk-reward profile is compelling.
Conclusion: Patience as a Strategic Advantage
In the world of investing, periods of underperformance are inevitable, even for the best companies. The divergence between the stock price and the underlying business strength of Netflix and Amazon creates a clear opportunity for investors with a long-term horizon.
The market’s short-term focus has opened a window. For those who can see past the quarterly noise and recognize the durable growth engines these companies have built, the potential for market-beating returns over the next five years is substantial.
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