Key Highlights
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Netflix experienced robust revenue growth in 2025, with significant profit increases as well.
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In 2026, the company projects continued double-digit growth in sales and profits.
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Considering Netflix’s forward price-to-earnings ratio might provide the clearest insight into its valuation.
Finding faults in Netflix (NASDAQ:NFLX) isn’t easy. With a subscriber base exceeding 325 million, the company reported revenues of $45 billion, up 16% from the previous year. This rate of growth outpaced the 16% increase seen in 2024.
What’s more, the way Netflix is evolving is quite remarkable. The growth stems not only from raising prices and increasing subscribers but also from the burgeoning revenues of its advertising sector, contributing around 3% of total earnings in 2025. Amazingly, all these gains came alongside a notable rise in operating margins.
However, despite these impressive results, Netflix’s stock has decreased by about 10% since the beginning of 2025, and it’s roughly 40% lower than the peak it reached last summer.
With shares currently priced below $80, it’s worth asking: is this a good moment to invest in Netflix?
Analyzing Netflix’s Stock Valuation
Even after recent price drops, Netflix’s stock still seems a bit pricey, reflecting the high expectations set last summer. While the company’s stock has dipped around 15% year-to-date, it now trades at a price-to-earnings ratio of about 32, suggesting solid prospects of double-digit growth in both sales and earnings per share in the coming years.
That said, the evaluation metrics appear more favorable. The forward price-to-earnings ratio offers a useful perspective. Analyst estimates for Netflix’s earnings per share over the next 12 months illustrate positive expectations, not just due to rapid business expansion but also because management anticipates further increases in operating margins in 2026. This combination of forecasted sales growth and operating leverage indicates potentially sizable profit increases.
So, what’s the anticipated price-to-earnings ratio for Netflix, trading around $80? It’s about 26—a more reasonable level for a business that saw 16% revenue growth last year and an increase in operating margin from 26.7% in 2024 to 29.5% in 2025.
Looking ahead, Netflix forecasts even stronger sales and margin growth, expecting a year-over-year sales increase of 12% to 14% in 2026, along with operating margin improvements projected from 29.5% to 31.5%.
It’s important to note that Netflix tends to have a different style in its guidance—providing “actual internal forecasts” aimed at being more accurate rather than overly conservative. This could mean that its reported growth rates sometimes fall short of initial expectations.
Nonetheless, the company’s ongoing operational momentum, paired with its optimistic growth projections, helps to explain the premium at which its stock trades.
Competitors Remain a Challenge
Even with Netflix’s positive financial trajectory, I’m not convinced that the stock is a definite buy right now. This skepticism stems from a belief that the current stock valuation may not sufficiently account for heightened competition risks.
Netflix’s own executives have pointed out the competitive landscape, describing it as “fierce” during the latest quarterly update. They emphasized that competition isn’t just from other streaming platforms but also spans all leisure activities, including social media and gaming. As viewing habits evolve, the lines between competitors are increasingly blurred. The rise of YouTube, with its focus on live TV and sports, has caught attention, as has Amazon’s extensive content library. Recently, I’ve been noticing that Apple’s streaming service is quietly growing as a competitor, too.
In sum, while Netflix’s stock is getting closer to reflecting the risks it faces, I personally don’t think it has reached that point yet.
Is Now the Time to Buy Netflix Stock?
Before considering an investment in Netflix, it’s worth reflecting on a few things.
A recent evaluation by the Motley Fool’s Stock Advisor identified what they feel are the best stocks to buy right now, and Netflix didn’t make the cut. These ten alternatives have the potential to yield significant returns in the years to come.
To illustrate, if you had invested $1,000 in Netflix from a recommendation back in 2004, it would now be about $446,319. Similarly, an investment in Nvidia made back in 2005 would be around $1,137,827 today.
The average return from Stock Advisor stands at an impressive 932%, significantly outpacing the S&P 500’s 197%. It might be worth considering the latest top ten stock list from analysts, particularly with the community support from retail investors.
