Do You Believe in Netflix's (NFLX) Strong and Sustainable Competitive Advantages?

Loomis Sayles, an investment management company, released its “Growth Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund returned 18.58% compared to 17.84% for the Russell 1000® Growth Index. The fund focused on a highly selective, long-term private equity approach to investing. Stock selection in information technology, communication services, consumer staples, and industrials sectors, as well as our allocations to the communication services and consumer staples sectors, positively impacted the fund’s relative performance, while consumer discretionary and healthcare sectors, as well as our allocations to the information technology, healthcare, financials, industrials, and consumer discretionary sectors, detracted. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Loomis Sayles Growth Fund highlighted stocks such as Netflix, Inc. (NASDAQ:NFLX). Incorporated in 1997, Netflix, Inc. (NASDAQ:NFLX) is an entertainment services provider. The one-month return of Netflix, Inc. (NASDAQ:NFLX) was 3.02%, and its shares gained 78.63% of their value over the last 52 weeks. On September 02, 2025, Netflix, Inc. (NASDAQ:NFLX) stock closed at $1,214.11 per share, with a market capitalization of $515.907 billion.

Loomis Sayles Growth Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its second quarter 2025 investor letter:

"Founded in 1997, Netflix, Inc. (NASDAQ:NFLX) is one of the world’s leading internet entertainment platforms and a pioneer of subscription video on demand (SVOD), which it first launched in 2007. Today the company is a global leader with over 300 million paid subscribers, out of what we estimate is a total addressable market of one billion households outside of China, who access TV series, movies, mobile games, and other entertainment content across a wide variety of genres, languages, and devices. The company has subscribers in over 190 countries, with an estimated global audience in excess of 700 million, and generates almost 60% of its revenue from outside of North America.

We believe Netflix’s strong and sustainable competitive advantages include its focus, scale, brand, and a large installed base of clients that are protected by high barriers to entry. As a pioneer in SVOD, Netflix has amassed a subscriber base that we estimate to represent just under 40% of all SVOD subscribers globally and approximately 50% of the industry revenue share of the leading global providers. The company’s strong brand is reflected in both its premium pricing versus peers and mid-single-digit growth in average revenue per user over the past five years. Over the past decade, Netflix has invested over $120 billion in content and amassed an estimated over 14,000 hours of original content, which is estimated to represent just under two times the next five largest streaming competitors combined. Of course, it is not just the quantity, but quality of the content that matters. Over this same period, Netflix received over 1000 Emmy nominations and had 218 wins. The company has captured the first or second spot in total Emmy Awards during the past six years, which we believe reflects the quality of its content. We believe the ability to create and acquire high quality content, based on cumulative knowledge and insights attained from its large installed base of subscribers, has contributed to very high barriers to entry.…” (Click here to read the full text)

Netflix, Inc. (NASDAQ:NFLX) is in 14th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 133 hedge fund portfolios held Netflix, Inc. (NASDAQ:NFLX) at the end of the second quarter, which was 150 in the previous quarter. While we acknowledge the potential of Netflix, Inc. (NASDAQ: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.

In another article, we covered Netflix, Inc. (NASDAQ:NFLX) and shared the list of most profitable tech stocks to invest in. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.