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

Netflix released its first-quarter earnings report on April 16. Here’s Morningstar’s take on Netflix’s earnings and stock.

Key Morningstar Metrics for Netflix

• Fair Value Estimate
  : $80.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

What We Thought of Netflix’s Q1 Earnings

Netflix’s first-quarter sales and margins exceeded its guidance, and it said the year is tracking its outlook. However, the market likely hoped for increased full-year guidance, given that the March price hikes came as a surprise, ostensibly enabled once the Warner Bros. Discovery acquisition fell through.

Why it matters: We believe shares have been priced for mid-teens annual sales growth. The 2026 outlook of 11%-13% organic growth was fine when it seemed the next US price increase would occur around year-end, consistent with the historical cadence. Growth acceleration in 2027 now seems less likely.

• Generating more revenue per user must be the primary growth driver, in our view, because Netflix has largely saturated the subscriber market in the United States and many of the highest-priced international countries. The US price increase came only 14 months after the previous one and exceeded 10%.
• We don’t think Netflix can raise prices at these rates annually, but think that’s what it will take to maintain low-teens growth. The advertising business remains small, and its contribution must offset any subscriber mix shift to lower-priced plans.

The bottom line: We maintain our $80 fair value estimate, which reflects these views. We forecast 10% average sales growth through 2030. Netflix is the only firm we cover with a moat (narrow) based on a streaming business and is worth owning at an appropriate price, which it is now approaching.

Key stats: Adjusted for currency fluctuations and hedging, total sales growth was 13% year over year, including only 12% in international markets, which had been growing in the high teens.

• The firm called out several strong markets in Asia and got an additional tailwind from tremendous success in Japan with the World Baseball Classic. Still, Asia-Pacific grew only 20% year over year—the bottom of its recent range.
• Currency-neutral sales in Europe, the Middle East, and Africa grew only 8.5% year over year, well off the recent mid-teens rate.

Fair Value Estimate for Netflix

With its 2-star rating, we believe Netflix’s stock is moderately overvalued compared with our long-term fair value estimate of $80, implying a P/E multiple of 25 and an enterprise value/EBITDA multiple of 20 times our 2026 projections. We project a compound annual revenue growth rate of about 10% through 2030, followed by mid-single-digit growth for the past five years of our 10-year forecast. We expect international markets to lead this growth, given the opportunities they still have to add new members. Netflix’s highest cost is content spending, but with sales growing faster than content spending and other costs, we expect free cash flow to grow from $9.5 billion in 2025 to almost $20 billion by 2030.

Read more about Netflix’s fair value estimate.

Economic Moat Rating

We assign Netflix a narrow moat rating based on intangible assets. Netflix has two advantages that set it apart from streaming-video peers: It has no legacy assets that are losing value, and it was the pioneer in its industry. Its subscriber base was critical in creating a virtuous cycle that we doubt can be attained by more than a small number of competitors.

Read more about Netflix’s economic moat.

Financial Strength

Netflix is in good financial shape. It ended 2025 with a net debt/EBITDA ratio of 0.4, holding $9.0 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 investing nearly $20 billion in content, we expect $11 billion in free cash flow in 2026, with growth each year thereafter throughout our forecast.

Netflix has repurchased over $20 billion in shares since 2023. Now that it won’t be acquiring Warner Bros., we expect share repurchases to accelerate. We don’t believe Netflix will be interested in any other large acquisitions; its stock price has traded at relatively low valuations, and the firm likely has few alternative uses for its cash flow. Netflix does not pay a dividend, and we don’t expect it to pay one in the near future, but we think it should.

Read more about Netflix’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Netflix is High. Our rating is largely based on the evolving streaming media landscape and the growing competition Netflix faces, including from free streaming platforms. Netflix is more focused on profitability and cash generation than it was in its infancy, meaning prices have risen substantially for consumers over the past several years. As competitors’ streaming businesses mature, they may bundle their services or offer them 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.

Other factors that bring greater uncertainty include the nascent ad-supported service, which requires the firm to successfully build an advertising business that makes up for the lower price these subscribers pay, and Netflix’s flirtation with major live sports and the potential for more regular-season games, which may promote customer stickiness but typically come at a very high price.

Read more about Netflix’s risk and uncertainty.

NFLX Bulls Say

• Netflix has already attracted a massive customer base and is profitable. This advantage over its competitors makes it more likely that a virtuous cycle can continue, with the firm securing more content that attracts and holds more subscribers.
• Advertising-supported subscriptions open Netflix to a wider pool 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 it has not 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 achieved when it worked from a lower base and with less competition.

This article was compiled by Jillian Moore.