Netflix, Inc. (NFLX): A Bull Case Theory

We came across a bullish thesis on Netflix, Inc. on Swiss Transparent Portfolio’s Substack. In this article, we will summarize the bulls’ thesis on NFLX. Netflix, Inc.'s share was trading at $1,274.17 as of July 17^th. NFLX’s trailing and forward P/E were 54.29 and 51.02, respectively according to Yahoo Finance.

Netflix (NFLX) is pursuing multiple growth levers to sustain its premium valuation, with its ad-supported tier and password-sharing crackdown serving as key drivers. The ad tier has surged to 94 million monthly active users by early 2025, doubling year over year, with U.S. users averaging 41 hours of monthly viewing. Ads deliver 8x better brand lift and 3x higher purchase intent than typical TV spots, benefiting from Netflix’s user data.

A proprietary Ads Suite, launched in April in the U.S. and Canada, will integrate AI-powered overlays and dynamic placements by 2026, expected to double ad revenue in 2025 as the platform moves to first-party ad tech. Since its 2022 crackdown, Netflix has converted tens of millions of shared accounts into paying customers, adding ~55 million net new accounts through mid‑2024, with 16–17% annual subscriber growth.

This tailwind is slowing, and Netflix will stop reporting subscriber counts and ARPU after Q1 2025, shifting focus to revenue, free cash flow, and engagement. AI also underpins innovation in conversational search and ad customization, reinforcing Netflix’s technological edge. Content spend is set to rise 11% in 2025 to ~$18 billion, emphasizing fewer, higher-impact hits while nudging operating margins toward the low‑30% range.

Strong free cash flow—$2.7 billion in Q1 2025 and ~$8 billion expected for the year—funds aggressive buybacks, with $13.6 billion authorization remaining. Q2 guidance calls for +15% revenue growth and +44% EPS growth, with ~33% margins; execution remains critical given the ~47x forward P/E. While upside is tempered, Netflix’s diversified growth, AI-enabled monetization, and disciplined spending underpin its long-term compounding story.

Previously, we covered a bullish thesis on Netflix, Inc. (NFLX) by Margin of Sanity in May 2025, which highlighted hidden value in its amortized content library supporting engagement and revenue. The company’s stock price has appreciated about 11.3% since our coverage, as growth levers gained traction. The thesis still stands. Swiss Transparent Portfolio shares a similar view but emphasizes ads, AI, and free cash flow.

Netflix, Inc. is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 150 hedge fund portfolios held NFLX at the end of the first quarter which was 144 in the previous quarter. While we acknowledge the potential of NFLX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.