Netflix Stock Will Be Worth More by 2028: My Case for Buying NFLX Now

Netflix shares are down 43% from their June 2025 all-time high despite continued earnings and free-cash-flow growth, leaving the stock at a reported forward P/E of 21. Management targets a 31.5% operating margin in 2026, up 200bps year over year, while its advertising business is expected to generate about $3 billion. Netflix repurchased a record $4.7 billion of stock in Q2 and had $27.1 billion of buyback capacity remaining at the end of June; the article argues these repurchases and margin expansion can support roughly 20% EPS growth.

Analysis

The investable question is whether Netflix can sustain a premium-media multiple while becoming a mature distribution platform. Incremental advertising and price increases are likely higher-margin than subscriber growth, but the market will demand evidence that ad revenue is additive rather than merely a lower-ARPU migration from the ad-free tier. Quarterly paid-membership monetization, ad-tier engagement, and advertising revenue per viewing hour matter more than aggregate viewing growth.

Live programming is strategically valuable because it reduces churn and creates advertising inventory, but it also introduces a less appreciated cost risk: success invites escalating sports-rights bids from DIS, AMZN, AAPL and WBD. Netflix's content-spend discipline could weaken over 6-18 months if management must defend live-event relevance, particularly as rights renew. The company is structurally better positioned than smaller streamers to amortize programming, while WBD and PARA remain more exposed to content inflation and linear-TV cash-flow erosion.

The selloff could be underdone if the reduced disclosure reflects deteriorating unit economics or if buybacks are masking slower underlying profit growth. Conversely, skepticism may be excessive if ad monetization reaches scale without a commensurate content-cost step-up; that would create a second earnings engine and support multiple re-expansion over the next 1-3 quarters. AI is not a near-term thesis driver for NFLX unless it demonstrably improves ad yield or production efficiency; NVDA has no direct read-through from this setup.

Key Decisions for Investors

• Initiate a 6-12 month long NFLX position only after the next earnings release confirms advertising growth exceeds ad-tier cannibalization and operating-margin guidance is maintained or raised. Target a 15-20% total-return setup from earnings growth plus partial valuation recovery; exit on a material margin-guide cut or evidence that content cash spending is accelerating faster than revenue.
• Use a relative-value expression: long NFLX / short WBD over 3-6 months. The pair isolates the scale advantage in global streaming monetization and avoids making a broad media-beta call; cover the short if WBD materially outperforms on deleveraging, asset sales, or a strategic transaction.
• For defined-risk exposure ahead of earnings, prefer NFLX 6-month call spreads rather than outright calls, using strikes roughly 10% and 25% above spot. This expresses upside from advertising and margin validation while limiting premium paid if the market continues to discount mature-platform growth.
• Set a monitoring trigger for advertising revenue per subscriber/viewing hour and content obligations at the next filing. If ad growth requires substantially higher sports or premium-content commitments, treat the current thesis as a watch item rather than adding exposure.