Netflix (NFLX): Exploring Valuation Following Recent Earnings and Subscriber Growth Momentum

Netflix (NFLX) shares edged slightly higher after the company’s latest quarterly earnings announcement. The report highlighted steady gains in subscriber growth and strong year-over-year revenue. Investors are now watching for signals about future profitability as competition heats up.

See our latest analysis for Netflix.

Netflix’s recent subscriber momentum comes as the share price has gained nearly 20% year-to-date, despite some bumps along the way. That said, total shareholder return over the past year stands at about 21%, with a remarkable 247% total return over three years. Momentum has cooled somewhat since the start of the year. However, the long-term trend remains impressive and continues to draw investor attention.

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Given Netflix’s substantial recent gains, steady financial performance, and ambitious forecasts, the real question for investors becomes clear: is there untapped value left, or has the stock’s future potential already been fully priced in?

Most Popular Narrative: 21.2% Undervalued

With Netflix shares closing recently at $106.14, the most widely tracked narrative suggests the stock is trading well below its estimated fair value. This perspective highlights a gap that could present meaningful opportunity for investors, setting up an intriguing case for potential upside.

The wider rollout and promising early metrics of Netflix's proprietary ad tech stack enable global expansion and increased monetization of the ad-supported tier. This positions Netflix to accelerate ad revenues and improve margin leverage with scale as more advertising demand shifts to streaming. Strong momentum in international markets, as seen in partnerships with leading local content producers (such as TF1 in France), allows Netflix to deepen market penetration and capitalize on rising broadband access and mobile usage globally. These factors are considered key drivers for long-term subscriber and revenue growth.

Read the complete narrative.

Curious what bold assumptions power this bullish view? Hint: the narrative leans on ambitious growth in both earnings and margins, plus some eye-catching projections for Netflix’s future scale. The full story uncovers which financial levers analysts believe could propel Netflix far beyond today’s valuation.

Result: Fair Value of $134.65 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensifying competition and escalating content costs could limit Netflix’s upside if subscriber or engagement growth does not keep pace.

Find out about the key risks to this Netflix narrative.

Another View: Market Ratios Tell a Different Story

While analyst narratives suggest opportunity, market ratios add nuance. Netflix trades at 43.1 times earnings, which is lower than the average of its direct peers at 76.3, but well above the US Entertainment sector’s average of 20.8. The fair ratio sits at 36. If the market shifts toward this value, it could signal valuation risk. Which view feels truer to you?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Netflix for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 926 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Netflix Narrative

If these viewpoints do not quite match your perspective, or if you are interested in examining the numbers yourself, you can develop your own Netflix story in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Netflix.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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