Netflix Inc.’s stock rebounded from its steepest drop in two years, as investors went past disappointing quarterly earnings to focus on long-term growth.

The shares climbed back to as high as US$385 on Tuesday after falling 15 per cent to US$342 in late trading Monday night, when the streaming-video provider missed analysts’ estimates for subscriber growth -- a key measure -- in the second quarter.

While the rare miss initially stunned Wall Street, many Netflix analysts have since urged caution. The company is still on track to add more than 20 million customers this year, and has struggled to forecast its growth in the past.

“Long-term fundamental trends remain intact,” RBC Capital Markets’ Mark Mahaney, who recommends buying the shares, wrote in a note to investors.

The stock has been volatile in the past when its earnings deviated from forecasts because investors are trading on future potential rather than current earnings. Netflix generates less the sales of Walt Disney Co., and as Netflix pared some of its losses Tuesday, its market market value inched back close to Disney’s again.

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As of 2:24 p.m. New York time on Tuesday, Netflix was down 5.8 per cent to US$377.38, giving the Los Gatos, California-based company a market value of US$164 billion. Disney stood at US$163.97 billion.

Netflix has been burning through cash to fund the production of new TV shows and movies, and market those shows to viewers all over the world. The company has repeatedly borrowed money, and Chief financial Officer David Wells said the company has no plans to alter that strategy in the future.

Netflix will now need to deliver strong results in the third quarter to sustain investor confidence. The company offered a conservative forecast for the quarter Monday, projecting it would add fewer customers than it did in the same time period a year ago.