NFLX vs. STRZ: Which Streaming Stock Has Better Upside Potential?

The streaming entertainment industry continues to evolve rapidly, with both established giants and smaller specialized players competing for viewer attention and subscription dollars. Netflix NFLX, the global streaming leader with more than 300 million subscribers worldwide, stands in stark contrast to Starz Entertainment STRZ, a newly independent premium content provider targeting women and underrepresented audiences with approximately 19 million North American subscribers. Both companies recently completed significant corporate milestones — Netflix executed a stock split in November 2025, while Starz separated from Lionsgate in May 2025 — making this an opportune moment to evaluate their respective investment merits.

Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for NFLX Stock

Netflix demonstrated renewed momentum in its third-quarter 2025 results, with revenues growing approximately 17% year over year to around $11.5 billion, marking the fastest revenue growth rate the company has achieved in several years. The streaming giant's advertising tier has reached an inflection point, with the ad-supported tier now reaching around 190 million monthly active viewers globally, and roughly 40% of new sign-ups in ad markets choosing the cheaper ad plans. Management expects ad revenues to more than double in 2025, providing a meaningful second growth engine beyond subscription fees that carries higher incremental margins.

Netflix's strategic push into live programming represents another compelling growth opportunity. The company has secured a 10-year deal for WWE Monday Night Raw and two NFL Christmas Day games coming in December 2025, alongside U.S. broadcast rights for the FIFA Women's World Cup in 2027 and 2031. These live events drive massive concurrent audiences, reduce subscriber churn, and provide premium advertising inventory. Management's confidence is reflected in their guidance for fourth-quarter 2025 revenues of approximately $11.96 billion, implying roughly 17% year-over-year growth, with full-year revenue expectations of $45.1 billion and an operating margin near 29%.

The company completed a 10-for-1 stock split on Nov. 17, 2025, making shares more accessible to retail investors and employees while signaling management's conviction in long-term value creation. Netflix's international expansion continues to bear fruit, with revenues in Asia-Pacific rising 21% year over year and Europe, Middle East, and Africa seeing 18% growth. The company maintains a robust content pipeline, including the final season of its popular series and high-profile films, positioning it well to sustain engagement and pricing power. Management has set an ambitious internal target of reaching a $1 trillion market cap by 2030 while expanding operating margins, demonstrating confidence in the business model's scalability and profitability trajectory.

The Zacks Consensus Estimate for 2025 earnings is pegged at $2.53 per share, down by 0.1% over the past 30 days. This indicates a 27.78% increase from the previous year.

The Case for STRZ Stock

Starz's financial loss widened to $52.6 million in the third quarter, representing a 72% deterioration compared to the $30.6 million loss during the same period in 2024. While the company added 110,000 streaming subscribers in the United States to end the quarter with 12.29 million customers, this growth was offset by linear subscriber declines, resulting in flat sequential total subscriber counts. Revenues increased modestly to $321 million, up just $1.2 million from the previous quarter, highlighting the company's struggle to generate meaningful top-line momentum.

The company's separation from Lionsgate, completed in May 2025, has introduced significant operational and financial challenges. Starz operates with a relatively high leverage ratio of 3.4 times, which management aims to reduce to 3.1 times by year-end and eventually to 2.5 times, but this deleveraging process will require sustained profitability improvements that remain uncertain.

Management's strategic pivot to content ownership aims to improve economics and generate international licensing revenues, but this transition requires substantial upfront investment during a period when the company is already loss-making. The shift in Starz's Canadian business model to a licensing agreement with Bell Canada, while potentially providing stable revenues, reduces direct subscriber visibility and control. The company lost 240,000 linear subscribers and 950,000 total customers year over year, underscoring the secular headwinds facing premium cable networks. With content investment projected to decrease and the company targeting $200 million in adjusted OIBDA for 2025, Starz faces the difficult challenge of balancing cost discipline with the need for compelling original programming in an intensely competitive streaming landscape dominated by much larger, better-capitalized rivals.

The Zacks Consensus Estimate for 2025 loss has widened to $4.05 per share from a loss of $1.37 per share in 30 days’ time.

Valuation and Price Performance Comparison

Netflix trades at a forward price-to-earnings ratio of 33.35 times, reflecting a premium valuation that acknowledges the company's market leadership, consistent execution, and multiple growth drivers. While this multiple appears elevated compared to traditional media companies, it is justified by Netflix's 17% revenue growth trajectory, expanding margins that reached 28% in the third quarter despite one-time charges, and projected free cash flow of approximately $9 billion for 2025. 

In contrast, Starz trades with a negative price-to-earnings ratio of 6.1 times, reflecting its current unprofitability. While the depressed valuation might superficially appear attractive, it primarily reflects substantial business challenges, including operating losses, high leverage, subscriber attrition, and limited scale in a capital-intensive industry.

NFLX vs. STRZ: P/E F12M Ratio

Netflix's shares have surged 20% year to date compared with STRZ's 2.2% decline and the Zacks Consumer Discretionary sector’s 21.1% growth.

NFLX Outperforms STRZ Year-to-date

Conclusion

Netflix holds decisively better upside potential than Starz Entertainment across virtually every fundamental dimension. Netflix combines global scale, diversifying revenue streams through advertising and live content, accelerating growth momentum, margin expansion, and substantial free cash flow generation. The company's strategic investments in sports rights and live programming position it to capture advertising dollars while reducing churn, and its content library depth provides sustainable competitive advantages. Conversely, Starz Entertainment struggles with widening losses, subscriber stagnation, high debt levels, and limited resources to compete against well-funded streaming giants. While Starz's discounted valuation might tempt contrarian investors, the deteriorating financial performance and challenging competitive positioning suggest substantial downside risk. Investors should track Netflix stock for attractive entry points following any near-term volatility, while staying away from Starz stock. NFLX currently carries a Zacks Rank #3 (Hold), whereas STRZ has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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