Do You Think Netflix (NFLX) is a Compelling Investment?

Core Insights - The Alger Spectra Fund's third-quarter 2025 investor letter indicates a strong performance in U.S. equity markets, with the S&P 500 Index rising by 8.12% due to improving economic conditions, solid corporate earnings, and expectations for monetary easing [1] - Class A shares of the Alger Spectra Fund outperformed the Russell 3000 Growth Index during the same period [1] - The fund highlighted Netflix, Inc. as a key investment despite a recent decline in its stock price [2][3] Company Overview - Netflix, Inc. is recognized as a global leader in streaming entertainment, providing premium video content through a subscription-based platform that now includes an advertising-supported tier and selective live-event programming [3] - As of November 10, 2025, Netflix's stock closed at $1,120.07 per share, with a market capitalization of $474.61 billion [2] Performance Metrics - Netflix's one-month return was -7.84%, while its shares gained 36.68% over the last 52 weeks [2] - The decline in Netflix's shares during the quarter was attributed to investor focus on full-year guidance and second-half profitability rather than strong fiscal second-quarter results [3] Investment Rationale - The Alger Spectra Fund views Netflix as a compelling investment due to its strong engagement, pricing power, and expansion into new revenue streams such as advertising and live events [3] - Management's focus on consistent revenue growth and profitability, rather than just subscriber metrics, is seen as a factor supporting a more predictable financial profile [3] Challenges and Outlook - Netflix's full-year revenue raise was largely attributed to foreign-exchange tailwinds, which disappointed expectations for stronger underlying demand [3] - Increased content and marketing investments in the second half of 2025 have tempered margin expectations, raising investor concerns [3] - Despite these challenges, Netflix is considered well-positioned due to its global scale and advertising initiatives [3]