After Earnings, Is Netflix Stock a Buy, a Sell, or Fairly Valued?

Netflix released its fourth-quarter earnings report on Jan. 20. Here’s Morningstar’s take on Netflix’s earnings and stock.

Key Morningstar Metrics for Netflix

• Fair Value Estimate: $79.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Netflix’s Q4 Earnings

Netflix’s fourth-quarter revenue rose 17% year over year (excluding currency tailwinds). For the full year, revenue also increased 17%, and the operating margin expanded 3 percentage points, to 29.5%. Guidance for 2026 is for 11%-13% organic sales growth and 2 percentage points of margin expansion.

Why it matters: The material growth slowdown is consistent with our forecast, based on a mature US market. In our view, Netflix needs international markets to grow at a high-teens rate to maintain the midteens average annual growth, but recent results don’t support that level.

• Sales in the US and Canada increased 15% in 2025, but were buttressed by subscriber additions at the end of 2024 and a US price increase last January. We expect a much smaller contribution from new members and pricing in 2026, with a US price increase before the fourth quarter unlikely.
• Excluding currency, we estimate international sales growth was only 14% in each of the last two quarters. We suspect the vast majority of roughly 25 million new members in 2025 were in international markets.

Key stats: Free cash flow guidance of $11 billion for 2026 was also in line with our estimates, but likely disappointed the market.

The bottom line: We maintain our forecast, and the time value of money brings our fair value estimate to $79 per share from $77. With outsize growth expectations no longer priced into its stock, Netflix appears fairly valued. With a narrow moat, it remains the highest-quality of its closest peers, in our view.

Fair Value Estimate for Netflix Stock

With its 3-star rating, we believe Netflix’s stock is fairly valued compared with our long-term fair value estimate of $79 per share, which implies a P/E multiple of 25 and an EV/EBITDA multiple of 20 times our 2026 projections. An acquisition of Warner Bros. is not included in our valuation. We think there is less than a 50% chance Netflix acquires Warner, considering Paramount’s aggressive interest. If Netflix does acquire Warner for the $27.75 per share that it offered, we think it would be slightly value-destructive for Netflix.

We project a compound annual revenue growth rate of about 10% through 2030, followed by mid-single-digit growth for the last five years of our 10-year forecast. We expect international markets to lead this growth, due to the opportunity they still have to add new members. In the mature and highly penetrated US and Canada markets, we expect far less new member growth. The mid- to high-single-digit average revenue growth that we project throughout our forecast in UCAN is led by price increases and advertising revenue.

Read more about Netflix’s fair value estimate.

Economic Moat Rating

We assign Netflix a narrow moat based on intangible assets. Netflix has two advantages that set it apart from streaming-video peers. First, it has no legacy assets that are losing value as society transitions to new ways of consuming video entertainment at home, allowing it to put its full effort behind its core streaming offering. Second, it was the pioneer in its industry, providing it a big head start in accumulating subscribers and moving past the huge initial cash burn that we see as necessary to build a successful streaming service. This subscriber base was critical in creating a virtuous cycle for Netflix that we doubt can be attained by more than a small number of competitors, which is what we think would be necessary to dampen Netflix’s ability to earn excess economic returns for the foreseeable future.

Read more about Netflix’s economic moat.

Financial Strength

Netflix is in good financial shape. It ended September 2025 with a net debt/EBITDA ratio under 1.0, with the firm holding $9.3 billion in cash and $14.5 billion in total debt. More importantly, the years of cash burn are long behind Netflix, giving the firm a good cash cushion after funding its content budget. Even after funding nearly $18 billion in content costs, we expect $9 billion in free cash flow in 2025. We expect free cash flow to grow each year throughout our forecast.

Netflix does not pay a dividend, nor do we expect it to pay one in the near future. It does have a share repurchase program in place, which should provide a major outlet for some cash flow. We don’t expect major acquisitions, as those have never been a part of Netflix’s strategy, but we believe it has plenty of flexibility to pursue any attractive opportunity that arises. We expect no difficulty in rolling over debt as it comes due. Almost half of Netflix’s debt matures through 2028 in similar annual increments, and another $6 billion matures over the following two years.

Read more about Netflix’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Netflix is High. Our rating is largely based upon the evolving streaming media landscape and the additional competition Netflix now faces. In our view, Netflix’s tremendous success is due largely to it being a first mover in the streaming industry and successfully adapting its business model to where the industry was going, while its media peers were largely still focusing on their legacy businesses.

The landscape has changed, as nearly every major media company is promoting its own stand-alone streaming service. Also, Netflix is more focused on profitability and cash generation that it was in its infancy, meaning prices for consumers have risen substantially over the past several years. Customers now have other choices for streaming subscriptions and the price they pay for Netflix is no longer an afterthought. As the streaming businesses of competitors mature, they may bundle their services together—with or without Netflix—or they may offer their services as add-ons for pay-TV subscribers who receive their linear channels, a foothold Netflix doesn’t currently have. These factors make it possible that Netflix will have a tougher time growing its subscriber base or generating as much revenue per subscriber.

From an ESG perspective, we believe potential social issues could carry the greatest risk. The entertainment industry in general has a history of bad behavior regarding issues like sexual assault and harassment and racial and gender discrimination.

Read more about Netflix’s risk and uncertainty.

NFLX Bulls Say

• Netflix has already attracted a massive customer base and level of profitability. This advantage versus competitors makes it more likely a virtuous cycle can continue, with Netflix securing more content that attracts and holds more subscribers.
• Advertising-supported subscriptions will open Netflix to a new base of subscribers and a major new source of revenue.
• Netflix has significant room to grow in international markets where it has already shown promise with local content.

NFLX Bears Say

• Netflix faces competition that it has not had to deal with in the past. As consumers have more options for quality streaming services, it’s more likely that Netflix could get cut out of some consumer budgets.
• Netflix’s US business is mature, with very high penetration of total households, meaning price increases may need to be a bigger component of future growth.
• Netflix will need to spend more on content—through sports rights and local international investment—to increase membership and prices at rates it has historically, when it worked from a lower base and with less competition.

This article was compiled by Rachel Schlueter.