Netflix Inc.’s
stock struggled through the winter as the company engaged in a bidding war for
Warner Bros. Discovery Inc
. But since ending the chase two months ago, the company has gotten back to basics, a strategy welcomed by investors and that’s expected to be validated when it
reports earnings
after the close.
The
streaming giant’s
shares have gained about 28 per cent since late February, when Netflix abandoned its pursuit of Warner Bros. The stock is one of the top 15 performers in the S&P 500 Index over that stretch, trading at the highest since December but still roughly 20 per cent below the record set last June. Meanwhile,
Paramount Skydance Corp.
is up about five per cent since it won the Warner Bros. battle, and Warner is down five per cent.
Netflix shares rose 0.3 per cent in midday trading Thursday, on track for a seventh-straight positive session.
“The end of the
M&A overhang
is a breath of fresh air for the stock and allows investors to focus on the key drivers of pricing, margins and revenue, all of which it should fare well on,” said Gerry Sparrow, who oversees about US$120 million as chief investment officer of the Sparrow Growth Fund, which has Netflix among its five biggest holdings.
Netflix’s interest in Warner Bros. weighed on the stock from the moment the company first made its bid in late November, with the shares falling 20 per cent from Nov. 20 until it bowed out of the race on Feb. 26. Since then, investors have responded to what’s seen as the company’s strong fundamentals and enviable position in the current landscape, where it is unaffected by a number of market risks, from artificial intelligence to the war in Iran.
“It looks like a safe haven against spiking gas prices, which makes it a good place to be in this environment,” Sparrow said. “Even if it is only hitting singles, those will add up. We think the stock could double over the next five years.”
While Netflix’s past three earnings reports have led to negative reactions in the stock, Wall Street is optimistic about this first-quarter print, which is projected to show revenue and net income growth of more than 15 per cent and steadily improving expectations over the coming quarters, with a recent price hike providing a tailwind.
The earnings will “reflect a strong start to 2026 as management continues to execute well against its core areas of strategic focus,” Goldman Sachs analyst Eric Sheridan wrote in a note to clients last week in which he upgraded the stock to buy.
No Geopolitical Risk
A particular appeal is that the shares appear to be insulted from some of the trends that are whipsawing other parts of market, like runaway AI spending and geopolitical uncertainty from the conflict in the Middle East.
“We like that NFLX is neither AI capex-heavy/FCF-pressured nor at material risk of AI disruption,” JPMorgan analyst Doug Anmuth wrote in a April 9 note. The company is one of his top internet picks and “a safer haven in case of elevated macro or geopolitical risk,” he added.
Indeed,
Wall Street
has rarely been more positive on the company. Of the 65 analysts tracked by Bloomberg who cover Netflix, 50 have buy ratings and none recommend selling, putting its consensus rating near the highest on record. What’s more, Wall Street pros see further upside for the stock despite its recent strength, with its 12-month price target of US$114 implying a six per cent gain from where it closed Wednesday.
Analysts have been boosting their earnings estimates for the company as well. The consensus expectation for Netflix’s 2026 net income per share has risen by 2.5 per cent over the past month, likely helped by the US$2.8 billion termination fee Netflix received from the failed Warner deal.
While the stock isn’t exactly cheap compared to other technology giants, it can appear that way based on its own history. Netflix is trading at around 32 times estimated earnings, well below its 10-year average of nearly 54 and slightly less than its five-year average of 33. But it’s priced at a premium to the Magnificent Seven tech giants and the S&P 500.
“This multiple isn’t the kind of bargain that gets me super excited,” said Samuel Rines, macro strategist at WisdomTree, which has about US$158 billion in assets. “But the fundamentals are strong and durable, with the kind of predictability that would justify a higher multiple.”
The one caveat for the enthusiasm is Netflix’s growth outlook, which is positive but slowing. After posting a 16% increase in revenue last year, the figure is expected to be 13.6 per cent in 2026 and 11.6 per cent in 2027, with continued deceleration in the subsequent two years, according to data compiled by Bloomberg. Following the 28 per cent growth in net income expected this year, Wall Street is looking for a similar deceleration in the subsequent three years.
However, analysts see the company’s sticky relationship with its customers giving it a base of support that makes it a relative safe harbour in uncertain times like these.
“There’s something of a hierarchy when it comes to streaming services, and Netflix is very near the top of it as an affordable luxury, so this isn’t a place where people would pull back to save money,” Rines said. “I don’t think people are stuck choosing between bread and Bridgerton. It isn’t a show-me story anymore. It’s a give-me-more story.”
—With assistance from Subrat Patnaik and David Watkins.
Bloomberg.com
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