If You’re a Netflix Shareholder… Get Ready! $NFLX

If you own Netflix, you have been on an absolutely wild ride, and lately it's been like the descending part of a roller coaster, all the way back to its February lows. Growth might be slowing, the competition is circulating, and shareholders are getting nervous, but is the fear overdone, or is it just getting started? Today, we're going to have three bull cases and three bear cases, and then we're going to run the numbers and find out what Netflix is really worth based on my own personal assumptions. But before we get into the bull case and the bear case, let's answer the big question on every shareholder's mind. If Netflix is such a great company, why is the stock dropped so much? And here's the important part. This is not the the business is broken story, not even close. This is a the stock got too expensive and expectations got too high story. Those are two very different things. This is what intelligent investors love to see happen. Look at how the business actually did in its most recent quarter. Revenue grew 16% from a year ago to $12.15 billion. Operating income, which is the profit from running the business, grew 18% year over year. Their profit margin climbed to about 32%, which is phenomenal, and they generated over $5 billion in free cash flow last quarter alone, which is the real cash left over after they pay all their bills, their taxes, and their capital expenditures. Guys, those are strong, amazing numbers. The business does not seem to be in decline. So, why did the stock fall? Reason one, and it's the biggest, expectations have been sky-high. Netflix had become a Wall Street darling again, and the stock was priced for near-perfection, meaning everything had to go right just to justify the price. When a stock is priced that high, good results are not good enough. Investors want a blowout. Instead, Netflix delivered strong numbers, but did not raise its forecast for the rest of the year. On Wall Street, that's a letdown, and the stock got punished for it. Reason two, growth is slowing down. It is still growing, but not as fast. Netflix expects revenue growth of about 13% next quarter, down from 16% this past quarter. A big reason is that the huge boost they got from cracking down on password sharing is fading. They had a 23 million new members in 2025, but that was way down from 41 million the year before. So, investors are asking, where does the next big wave of growth come from? Will there be a next phase of growth at all? And reason three, that giant deal. Netflix spent months chasing Warner Brothers Discovery, and investors got nervous, worried about the price, the regulators, and whether Netflix was drifting away from the simple, money-printing streaming model that made it great. In the end, Netflix refused to overpay, and they walked away. The market actually liked that discipline, but the whole drama left the cloud of uncertainty hanging over the stock for months. Now, guys, the $5 billion in free cash flow last last quarter was awesome, but I believe it also included $2 billion of a breakup fee from that Warner Brothers digital deal. But, even taking that out, they were at $3 billion in free cash flow, which was still a monster number for them. All right, reason number four is a money timing issue under the hood. Netflix spends billions of dollars making shows, and the way that cost gets counted bounces around from quarter to quarter depending on when big titles launch. This particular stretch happens to be a heavier cost period, so profit margins dip a little in the short term, even though Netflix still expects margins to grow for the full year. It's a great long-term story with messy short-term optics, and nervous investors don't like messy. I would actually change that. Speculators don't like messy. Monish Pabrai, who's He was of our channel, we had a great interview with him a few years ago. Always says the market hates uncertainty. And then there's the advertising business. It's exciting and it's growing incredibly fast. But here's the catch the bears point to. It's still only a small slice of Netflix total money today. So it's not not yet big enough to fully fill the gap if subscriber growth keeps slowing. On top of all that, competition fears are back. YouTube, Amazon, and Disney are all fighting for your attention. And even Netflix founder Reed Hastings, who I think is a massive douchebag, is stepping off the board. None of those alone is a disaster. But stacked together, they gave nervous investors plenty of reasons to sell. See guys, this is such an important lesson. Any stock, no matter how great, can see the sentiment flip from positive to negative without notice. The good news, that could happen the other way as well. But here's the fact that I want you to hold on to as we go through today's video. While the stock was falling, the business has very much still kept winning. Last year, Netflix pulled in over 45 billion dollars in revenue, up 16% from 2024. And it pushed its profit margin up by three full points. Guys, that's a huge jump. Its ad business grew more than two and a half times to over a billion and a half dollars. Guys, all the numbers I told you earlier about the 16% revenue growth, the 18% profit growth, the 5 billion dollars in free cash flow. We covered all of this on our Everything Money Plus channel when we did the earnings. They were so strong. So keep this straight. The stock went down, but the company kept going up. The fundamentals kept getting better. But now that gap is exactly what we're here to measure. Because remember, Peter Lynch always says there's nothing better than a company's stock price falling as the fundamentals are getting better. So let's see if the fear created an opportunity starting with the bull cases. Bull case number one, Netflix is becoming the world's default TV network. Think about it. Netflix isn't just an app anymore. It's turning into an entertainment utility for the whole planet the same way electricity or water is just always there. It has the scale, it has the data, it has the brand, and it has the content budget that almost no one else can match. And here is the rare part. It's huge, it's still growing revenue in double digits, and it earns elite profit margins over 30%. Most giant companies stop growing fast. Netflix is somehow doing both at once. The bulls say that if Netflix can keep growing in the low to mid teens while holding strong margins, it becomes a long-term cash generating machine for years and years to come, which very well could be true. But of course you have to ask the question, what is the right price for that future cash? Bull case number two, the ad business could become a second giant profit engine. Think like Amazon. Netflix only recently started showing ads on a cheaper plan, and it's already exploding. Ad revenue is roughly doubling on track for about $3 billion this year. And some analysts think this is just the start. Estimates have it growing 35% a year with one projection saying Netflix could pass Disney in ad revenue before 2030. Why does this matter? Cuz ads give Netflix a whole new way to make money beyond just raising subscription prices. It can earn even more per viewer and pull in people who want a cheaper plan. The bulls say this opens up a much longer runway for growth than most people even realize. And you guys remember, you're on YouTube right now. You're going to see ads in this video. People are accustomed to ads. So, I like what Netflix did there. They're sitting there saying, people are okay with it, let's give it to them. Bull case number three, pricing power plus stock repurchases could drive big earnings growth. Netflix keeps proving it can raise prices and people don't leave. That is pricing power and it's one of the most valuable things a business can have according to Warren Buffett himself. Their margins are already climbing and here's the kicker the bulls love. Netflix just authorized a $32 billion stock repurchase. Let me explain why that matters in plain English. When a company buys back its own shares, it shrinks the number of shares outstanding. So your slice of the company gets bigger without you doing anything. Their $31.8 billion is enough to buy back nearly 10% of the whole company. So, let me give it to you very easily. Let's say a company has 10 shares outstanding and you own one. You own 10% of the business. If they buy back one share, which is about 10%, they go from 10 shares outstanding to nine. Guess what? You still own that one share. That's not been taken away from you. That's not been reduced. So now you own one out of nine shares, which is 11.1% of the company instead of 10%. That is the power of buybacks, but it's really important to remember, you have to buy back inexpensive stock. So even if subscriber growth slows, if the stock stays low enough where it makes sense and Netflix can buy back shares, they can increase your earnings through higher prices, ads, and decrease in the share count. That is three things working together. Now, let's flip it. I'm going to give you the bear case because you're going to own Netflix, you need to know what could go wrong. You absolutely have to understand both sides of the coin. Bear case number one. The easy growth phase may be over. Remember that huge boost in the password sharing crackdown that I mentioned? The bears say that was a one-time sugar rush and it's fading fast. Remember, new members dropped from 41 million in 2024 to 23 million in 2025. But guys, I find that funny that bears are sitting there saying, "Oh, they they went from 2041 million to 23 million. Okay, a lot of people have the have the service. That's going to happen. From here, growth has to come mostly from raising prices and selling ads, not from tens of millions of brand new subscribers pouring into the product for the first time. And here's the problem. The stock was priced like a fast-growing company. If growth settles into low double digits, the bears say it may no longer deserve that high price tag and the stock could keep drifting lower. This is a great learning lesson for any other company you watch. We talk about this all the time. Yes, people price for great growth, but what the average person out there does is they look at the past growth and say that's going to repeat. Guys, it's hard for that to happen. As companies get bigger, it's hard to grow fast. And that's exactly why our fifth tenant of principle-driven investing is that a great business and a great story will become a bad investment if you pay the wrong price. If you assume all the great things in the past will be just as good in the future, it might be a problem. Bear case number two. The competition is getting more dangerous. I think there's been a consolidation of a lot of different streaming services, and bears aren't saying that Netflix is getting destroyed. It is still the leader, but they are saying attention is finite. There are only so many hours in a day and everyone is fighting for them. YouTube dominates the time people actually spend watching. Amazon bundles Prime Video with free shipping and has powerful advertising technology. Disney has all these great franchises, and live sports are becoming a bigger and bigger deal, which Netflix has gotten into. In fact, part of why the Netflix stock fell after earnings was investors worrying about exactly this. Amazon, YouTube, live sports, the ad war, Paramount just won the bid for WBD, more competition can quietly cap how much Netflix can raise prices and push its content costs much higher. Bear case number three, the stock may still be priced for a near perfect execution. This is the clearest warning for a value investor, so listen closely. Netflix is a wonderful company. Nobody's arguing that, but the price has often assumed that everything goes right. Strong growth, high margins, booming ad business, endless pricing power, and competitors who never land a punch. That's a lot of must go right. We just saw what happens when reality comes in merely good instead of perfect. Netflix reported strong results, didn't raise its forecast, and the stock dropped anyway. That's the whole danger in one sentence. A great business can be a bad investment if you pay the wrong price. And even after this drop, the stock may still be priced for a perfect future that may not show up. If the bears are right, cheaper doesn't automatically mean cheap. That's why our stock analyzer tool is so essential. So, who's right? The bulls or the bears? Guys, the future is unknown, and each bull case and each bear case has different weighting. But, the good news is we have our process to help dig that apart and give us more insight into which one might be more right. We're going to run the numbers to determine that right now. And guys, really quick before we dive into the numbers, as a reminder, do not take our title and thumbnail too literally. We are never here to give you a stock tip. We're here to teach you a process so that one day you can sleep better at night because you know how to value a stock, make good assumptions about its future, and understand the price you are paying based on your assumptions. So, let's pull up Netflix here and take a quick gander at it. So guys, first off, the actual price of the business is the market cap, $318 billion. The stock price times the number of shares outstanding. Now, the enterprise value here is buying all the shares and all of its debt. So, if you wanted to buy the company in full and pay off all its debt, you'd pay 335 billion. That $17 difference is that debt essentially. Guys, they generate 11.9 billion in free cash flow, but that did include the $2 billion from WBD, so it's actually $9.9 billion. Look at that distinction I just made. I'm sitting there saying, "Guys, that was a one-time thing. You can't rely on that. Take it out." I really truly believe that. Next, we have great returns on capital. 16.3% a year for the last 5 years, 19.7 for the last 1 year. Look at these margins. 17% in the last 10 years, 20% the last 5, 28% for the last 1 year. Now guys, that 28% includes the $2 billion in there. You got to take that out. So, that's going to be roughly 23 or 24%, which is still growth in profit margin. Now, our community members have this company as a hold with an intrinsic value of $72. So, they're saying, "We think the company's worth 72 bucks." Let's go to our eight pillars. Love seeing this. Six check marks and the two X's are basically valuation. Why do I love seeing this? It tells me this company's probably pretty decent fundamentally. The question is, can we pay the right price? And that's just a matter of being patient. That's all you have to do when you're doing that. They They're buying back shares. They have high returns on capital. They have cash flow growth, revenue growth, net income growth, and reasonable amounts of debt. Now guys, I threw a lot at you right here. If it feels overwhelming, I want to remind everybody you're not alone. We are here to simplify all of this. Every single investor in the history of the world was overwhelmed at some point, even the best ever. So, I'm making this really easy for you. I have an absolutely free key metric PDF that you can download in the description below. It'll explain all these key metrics to you. That way, we can be speaking the same language and as you talk to your friends about investing, you can wow them and impress them with your understanding of these very simple, but very unknown metrics. So, let's go to our analyst estimates. We have 366 per share this year, doubling essentially to 720 in the next 7 years. And we've got revenue growth of 52 billion going to 96 billion also in 7 years. So, that's a little under 10% on the revenue growth and about 10% on the earnings per share growth over the next 10 years. Guys, I hope you see why I teach on YouTube now. I'm really trying to make sure you guys understand that understanding a company isn't as complicated as people make it out to be, but buying a stock is not as simple as people make it out to be. We're here to sit here and understand that you're buying a business. So, let's go run our stock analyzer tool to sit there and determine what the right price to pay for this company is. So, guys, I'm doing a 10-year analysis. First question, revenue growth in the next 10 years. I did 6, 8, and 10% revenue growth. Now, profit margin and free cash flow margin. Remember, we took out the 2 billion. So, I did 20, 23, and 26. Could still be low, by the way, guys, cuz their margins are getting better. So, I might be too conservative here, I fully acknowledge. Next, what PE and what price to free cash flow would I assign to this company 10 years from now? Well, guys, the market average is 15 or 16 over long periods of time. But, you've got to pay higher for quality businesses and lower for bad ones. This is a quality business, as we can see from the returns on capital. It dominates the streaming market, in my opinion. So, I look at it going 20, 23, and 26. You could disagree with me and say 18, 21, and whatever you want to put in there, but this is where I think is a multiple for earnings and free cash flow 10 years from now. And then finally, my 9% no margin of safety return. This is just to find out what is my intrinsic value. But you got to remember, you must put a margin of safety in here, which means a higher return than the market. How much higher? All depends on you. So, you can see I've made pretty reasonable assumptions on Netflix. And this is something that you guys can easily learn to do with stock analyzer to save you many hours on research. And that's exactly why you need this. What you just watched took me about 3 minutes to do, and that's with me explaining. And it told me far more about the stock than most people will ever know before they buy it. Most people out there would have just looked at the price, read a headline or two, and made a decision based on that. That's how you buy a stock and then feel sick to your stomach when it drops. Because guess what, guys? It will likely drop after you buy it. You never knew what it was worth in the first place if you just bought it based on a stock price and the headlines. The stock analyzer tool's what changes that completely. You put in smart assumptions about a company's growth, about their margins, exactly what you just watched me do right here, and it's going to show you the right price based on your assumptions to get exactly the returns you're looking for. This is not a guess. It is a number that means something based on your own assumptions. People who use this are more likely to stop making drastically emotional decisions when buying and when bailing on a company. They're going to quit buying on hype. They know what they own, they know what they paid, and they know exactly why. That's what it feels like to sleep well at night, no matter what the market is doing. And here's the thing. You saw how simple it is. If I can do it live here in a few minutes, you can do it even faster because I had to explain everything here. And you don't need a finance degree. You don't need to be a math person. You just need the right tool and the right process for thinking. So, here's what I want you to do right now. I want you to think about what that's worth to you. Of course, it's worth over a dollar a day. But the good news is, we have a 7-day trial for $7, $1 per day. Click the link below, get full access right now. Run Netflix or whatever stock you've been thinking about buying. See what the numbers actually tell you before you spend 1 minute and $1 on it. So, here's what my results look like. I hit the analyze button. The stock is currently at $74 per share. I have a low price of 50, high price of 107, and guys, it's worth about what I'm sitting here saying, $74 a share. Now, I did mention the margin could go higher, one area in which might drive the price higher, but it doesn't feel to me that it's in my appropriate return range for me to go forward with it. So, for me, guys, and this is based on my life, I want a 15% return. Guys, I'm not telling you you should have that. I've got businesses, I got real estate, I got a lot of things that I have going for me. I can be very picky about buying companies. My return used to be 12%, but over time I thought to myself, let me make it 15%. I only want to buy the companies that make a ton of sense for me. So, for me, I'm going to buy the company if and only if it basically hits $50 a share. And guess what? It's on my watch list at 55. Why? Because it allows me to re-evaluate the stock and decide if I'm going to sell puts on it, which is allowing me to buy the stock at a lower price, but be paid for it. Or, the fundamentals may have gotten better, and 55 might be the right price then. Now, guys, there are six stocks that the market has called to replace the Mag 7. I want you to watch that video right here. Thank you very much for your time.