Key Points
Netflix and Shopify have dipped due to company-specific or broader industry issues.
Both are still posting strong financial results, remain leaders in their niches, and have strong moats.
They look well-positioned to capitalize on the runway for growth in their respective industries.
- 10 stocks we like better than Netflix ›
Many investors are chasing after artificial intelligence (AI)-focused companies that have already gained substantial market value this year. That's not a bad strategy, considering the AI industry may maintain its momentum for a while and reward these leaders even more. However, it's also important for investors to consider companies that haven't performed well recently. There may be opportunities to pick up attractive stocks on the dip. In fact, here are two great examples: Netflix (NASDAQ: NFLX) and Shopify (NASDAQ: SHOP). Here is why these companies are worth investing in right now.
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1. Netflix
Netflix stock recently hit a 52-week low. A poor second-quarter guidance and the departure of Reed Hastings -- who will no longer have any role at the company after co-founding and helping lead it as its co-CEO for a long time, and being a member of the board for the past few years -- are spooking investors. However, now that the stock has declined by 43% over the past 12 months, Netflix's shares look very attractive. Let's consider four reasons why. First, it's not uncommon for Netflix's shares to drop significantly after earnings. But the company tends to rebound. Investing in Netflix's stock after a major sell-off has generally been an excellent idea.
True, the past is no guarantee of future performance, but Netflix's business still has what it takes to perform well. Which brings us to our second point: Netflix's position in streaming remains strong, even though competition has intensified significantly since the turn of the decade. But Netflix has adapted. It offers multiple subscription options to cater to customers of all types, including price-sensitive ones. It also boasts a deep user base whose viewing habits and preferences help it craft its strong content strategy. That's why Netflix continues to attract new members. As of the end of 2025, the company had over 325 million paid subscriptions.
There is a good chance that number will keep climbing, given Netflix's network effect: The more users on its platform, the more data it has access to, which helps it determine which shows and movies to create or license. The result is an even better content library and even more paying members. Third, Netflix still has attractive opportunities in streaming, notably by making further headway into market niches it does not currently dominate but are very lucrative. That's what it's been doing in the realm of sports streaming. It may take a while for Netflix to gain a foothold there, but if it can, that will help boost the company's sales and earnings over the long run.
Lastly, Netflix is increasingly leveraging technological advances, including AI. For instance, it launched a feed of short, TikTok-style videos personalized to each user's preferences, powered by an AI-based recommendation algorithm designed to help users find new shows. Initiatives like this may help boost engagement. Netflix still has ample white space in the streaming industry, and the company is well-positioned to capitalize on it over the long run. That makes it a top stock to buy on the dip.
2. Shopify
Shopify has suffered the same fate as many other software companies this year. Many investors believe that AI will replace their services and are exiting the industry in droves. It also doesn't help that Shopify's valuation looks steep. Even after losing 27% of its value this year, Shopify is trading at 61 times forward earnings, versus an average of 22.4 for information technology stocks. That said, when focusing on Shopify's underlying business, things seem to be going just fine. In the first quarter, the company's revenue rose 34% year over year to $3.2 billion.
Shopify's revenue growth rate accelerated versus the first quarter of 2025, when it posted year over year sales increase of 27%. Also, although the company wasn't profitable, its net loss of $581 million was better than the loss of $682 million reported in the year-ago period. And, aside from the impact of the company's equity investments -- a better gauge of profits from day-to-day operations -- Shopify posted a net income of $360 million, 59% higher than the year-ago period.
Meanwhile, the company's free cash flow jumped 31% year over year to $476 million, while its free cash flow margin held steady at a healthy 15%. Shopify's second-quarter guidance was slightly disappointing: it expects year-over-year top-line growth in the high twenties. Even so, the company is performing well and is actually incorporating AI into its services to enhance clients' experience. That's the thing: AI may not replace software companies at all. It might, instead, help them offer even better products to their customers. Shopify has launched several AI-powered services, including a store builder that does the job in minutes.
Further, the company still boasts a strong competitive advantage thanks to switching costs, as well as a long runway for growth in the e-commerce industry, which remains in high-growth mode. Shopify should grow into its valuation over the long run as it capitalizes on the massive opportunities ahead.
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Prosper Junior Bakiny has positions in Shopify. The Motley Fool has positions in and recommends Netflix and Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
