Down 40%, Is Netflix a Screaming Buy or a Cautionary Tale?

Core Viewpoint - Netflix has shown solid growth but has recently experienced a significant decline in stock value, raising questions about its future performance [2][5]. Financial Performance - Netflix reported a revenue growth of 17.6% in 2025, reaching $12.1 billion, surpassing the consensus estimate of $11.97 billion, with an operating margin of 24.5%, up from 22.2% [3]. - For 2026, Netflix anticipates revenue between $50.7 billion and $51.7 billion, representing a 12%-14% increase from 2025, with a target operating margin of 31.5% [4]. Market Position and Valuation - With a market capitalization around $400 billion, Netflix's growth rate appears healthy, although revenue growth is expected to slow after 16% growth in 2025 [5]. - The company is projected to achieve approximately $3 in earnings per share in 2026, resulting in a forward price-to-earnings ratio of 28, aligning with the S&P 500's trailing P/E ratio [9]. Strategic Moves - Netflix is pausing share buybacks to accumulate cash for the acquisition of Warner Bros. Discovery, which has raised investor skepticism [6]. - To enhance the appeal of the acquisition for WBD shareholders, Netflix has modified its offer to an all-cash deal [6].