Netflix and Amazon Shares Present Potential Value Opportunity After Recent Overselling for Investors

Think of the stock market like a giant roller coaster—sometimes it climbs high, and sometimes it plunges unexpectedly. This week, that roller coaster took a sharp dip, and some big-name stocks got caught in the drop. Here’s why it matters, especially if you’re an investor looking for opportunities or risks.

Why Did Stocks Drop This Week?

Many investors are worried that new advances in artificial intelligence (AI) could shake up businesses and hurt profits. This fear led to a market sell-off, with the three major U.S. stock averages all falling. Software companies dropped first, but soon after, gaming, insurance, real estate, media, and delivery companies also took a hit.

Spotlight on Oversold Stocks

Some stocks fell so much that they’re now considered “oversold.” This means they might bounce back soon. One way to measure this is the 14-day Relative Strength Index (RSI). If a stock’s RSI is below 30, it’s called oversold, and if it’s above 70, it’s overbought.

• Fox: Its RSI is about 18.6, making it one of the most oversold stocks.
• Netflix: With an RSI of around 24, it’s also on the oversold list. Netflix dropped 6.5% this week.
• DoorDash: The most oversold stock right now, with an RSI of 16.45. It lost more than 12% this week.
• Amazon: Down 5.5% this week and about 14% so far this year.
• Intuit and Booking Holdings: Also considered oversold after this week’s declines.

Experts like Wells Fargo’s Steven Cahall say the drop in media stocks like Fox might be overdone, since most of Fox’s business is live sports and news—areas less threatened by AI. Bank of America also thinks DoorDash could bounce back if its upcoming earnings report is strong and says the company isn’t as exposed to AI risks as others.

According to a study by Investopedia, stocks with an RSI below 30 often see a short-term rebound, but it’s not a guarantee.

Bull Case: Why Some Investors See Opportunity

• Oversold stocks might be undervalued and could rebound quickly if market fears fade.
• Companies like Fox and DoorDash have strong parts of their business that may not be hurt by AI.
• Some analysts think the recent sell-off was an overreaction, creating good entry points for long-term investors.
• Historically, sharp drops sometimes lead to strong recoveries—like March 2020, when the S&P 500 bounced back over 60% in a year after a big sell-off (NY Times).

Bear Case: Why Others Are Cautious

• AI is still a big unknown and could hurt company profits more than we expect.
• Stocks can stay oversold for a long time if the market’s mood stays gloomy.
• Some sectors, like technology and media, are especially sensitive to changes caused by new tech.
• Even strong companies like Amazon are having a rough year, showing that big names aren’t always safe.

What About Overbought Stocks?

While some stocks are oversold, others are “overbought.” These have RSIs above 70, meaning they may have climbed too fast and could be due for a dip.

• Equinix: RSI around 85, up 12.7% this week after strong earnings and a higher dividend.
• Texas Pacific Land: RSI about 82, also considered overbought.
• Verizon, Marriott International, and Motorola Solutions: On the overbought list, too.

Investors should be careful—buying stocks that are overbought can be risky if prices fall back to normal.

Investor Takeaway

• Look for opportunity in oversold stocks—but only if you believe in the business and can handle short-term swings.
• Be cautious with overbought names; consider waiting for a better price if you want to buy in.
• Pay attention to company earnings—upcoming reports from DoorDash and others could change the story fast.
• Diversify your portfolio so you’re not too exposed to one sector or trend, especially with AI shaking things up.
• Remember history: Market drops can be scary, but patient investors often find chances when others panic.

For the full original report, see CNBC