Time to log into Netflix?

Even the highest-quality stocks are being sold in this market to make space for Semis/AI/SpaceX/Hype stocks. This drawdown in Netflix may be an opportunity.

In December, Netflix agreed to buy Warner Bros. Discovery's studios and streaming for $83 billion. The stock dropped ~35% on this news. But when the deal was canceled (it was not worth the price), the stock jumped ~40% but has given back all of the gains.

Netflix now trades near $80, down about 38% from last year's high of $134. The market took a maturing growth story, added AI and merger fears, and marked it down.

Here is what the market is neglecting. Revenue is still compounding. Margins are climbing from 29.5% toward a guided 31.5%. Free cash flow yield is ~3.3%. The advertising engine has just crossed 250 million monthly viewers and is just getting started.

Great franchises rarely go on sale when the headlines are kind.

In January, we put Netflix in the too-hard bucket and said we would wait for the merger to resolve or the multiple to come in. Both happened.

Is this a below-market price for a quality compounder? We did the work, and the full Netflix deep dive lands next week.

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