Netflix stock has taken a beating in recent months, down 42% from its all-time highs. For a company once seen as untouchable, the ongoing decline may be making investors nervous.
Notably, Bill Ackman just built a new position in Netflix (NFX) through his hedge fund, Pershing Square Capital Management. The stake, 3.15 million shares, now accounts for 4.9% of his portfolio.
Is Netflix stock a bargain hiding in plain sight, or a classic value trap dressed up as a buying opportunity?
Ackman bets big on NFLX stock
Ackman’s move is notable because of history.
He bought Netflix stock in early 2022 and sold three months later, reporting a loss of more than $400 million after the company reported its first subscriber decline in a decade.
This time, his tone has flipped. In Pershing Square’s mid-2026 investor letter, the firm wrote that Netflix has “effectively won the streaming wars.”
Related: Bill Ackman does U-turn on Netflix, makes bold claim
Netflix now serves more than 325 million paid subscribers worldwide, nearly double its closest rival.
A bigger base means more money to spend on content while still protecting profit margins, as the financials show.
Netflix earnings show steady growth
According to the Q2 earnings call transcript:
- Netflix reported $12.4 billion in sales in Q2, an increase of 13.2% year over year.
- Growth has slowed a bit from the double-digit surges of the pandemic years, but it is still running at over 13%.
CFO Spence Neumann addressed the growth question directly on the Q2 2026 earnings call.
He said Netflix expects 13% to 14% top-line growth for the full year, or roughly 12% on an FX-neutral basis, translating to about $6 billion of incremental revenue.
He was clear the company does not manage quarter-to-quarter.
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“We’re guiding to 12% revenue growth in Q3 reported, 11% FX neutral,” Neumann said. “Halfway through the year, we’re making strong progress against our goals, and we’re tracking to our financial plan for 2026.”
Profitability is the more interesting story.
- Gross margin has climbed steadily, from 38.9% in 2020 to almost 52% in Q2.
- Operating margin sits at 33.4%, up from 31.7% just a year earlier.
Neumann also pointed to the room left in the market. Netflix has penetrated less than 45% of the roughly 800 million addressable households worldwide.
Management estimates the streaming platform captures just 7% of a $670 billion addressable revenue market and only about 5% of global television viewing share.
Engagement and pricing power remain intact
One worry investors have flagged is slowing viewing hours.
On the call, Co CEO Greg Peters said total view hours grew 2% in the first half of 2026, an incremental 1.5 billion hours versus the same period last year, and a slight acceleration from 1.5% growth in 2025.
He also argued that raw hours do not tell the whole story.
Live events made up an estimated 5% of the content budget this year but only 1% of view hours, yet six of the top ten new member signup days over the past five years came from live programming.
On pricing, Peters said recent increases in markets like the United States, Mexico and Spain have gone as expected, with no drop in receptivity. He also made the case for value.
Peters said:
“I believe that we are delivering one of the best entertainment values that has ever existed. Our ads plan at $8.99 in the United States, we think is an amazing entry point.”
He added that the gap between ad-tier revenue per member and the standard, ad-free tier is narrowing, which he called “near term under realized revenue growth.”
The balance sheet also looks healthier than it did five years ago. Total assets sit at $58.5 billion against total liabilities of $28.3 billion.
Long-term debt has declined, from $14.4 billion in 2022 to $11.8 billion today, even as the business has grown substantially.
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Is Netflix stock undervalued right now?
Netflix repurchased $9.9 billion of its own shares over the last twelve months. CFO Neumann noted the company bought back $4.7 billion in the second quarter, its largest quarter of buybacks in company history, with about $27 billion still authorized.
The case for undervalued rests on the gap between the stock price and the fundamentals. Revenue, margins, free cash flow, and buybacks are all moving in the right direction. Management is not chasing growth at any cost either.
Ted Sarandos noted content spending is rising about 10% this year, below the 14% average pace of the last decade, even as new formats like live events, games and podcasts expand the business.
The case for a value trap would need evidence that growth is structurally slowing for good, not just decelerating from unusually strong prior year comparisons, which is what management described on the call.
Consensus data compiled by Tikr.com suggests that Netflix is projected to end 2030 with a free cash flow of $22 billion. If the streaming stock trades at 25x forward FCF, similar to its current multiple, it could return 70% within the next 40 months.
Out of the 32 analysts covering Netflix stock, 24 recommend “Buy”, and eight recommend “Hold”. The average NFLX stock price target is $95.5, indicating an upside potential of 22% from current levels.
Right now, the numbers lean toward a company still executing well, even if the stock chart tells a rougher story. Whether that gap closes depends on whether Netflix keeps delivering the kind of results it just posted.
Related: Netflix just made its slowdown harder to measure
