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Netflix delivered strong fourth-quarter results, but guidance was mixed.
Doubts remain about its planned acquisition of Warner Bros. Discovery.
The stock looks more affordable than it has in a long time.
Netflix (NASDAQ: NFLX) is one of the best-performing stocks of the 21st century and has also been one of the big winners of the last few years.
Even while most of its legacy entertainment peers have struggled, Netflix has impressed by delivering continued subscriber growth, launching a successful advertising tier, and creating hit programming like KPop Demon Hunters.
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However, in recent months, Netflix has suddenly struggled. Including its 5% decline after hours on its earnings report, the stock is down nearly 40% from its peak last summer. Is the stock a buy? Let's take a look at what the latest report had to offer.
Image source: Netflix.
Netflix closed out 2025 with its fastest revenue growth in at least five quarters as the top line rose 17.6% to $12.1 billion, which edged past the consensus at $11.97 billion, and it delivered another strong profit with an operating margin of 24.5%, up from 22.2%.
Looking ahead to 2026, the company expects revenue of $50.7 billion-$51.7 billion, up 12%-14% from 2025. It also said ad revenue was expected to double, and it was targeting an operating margin of 31.5%. Based on that forecast, Netflix expects operating income to reach $16.1 billion, or a 21% increase from 2025.
For a company the size of Netflix, which is currently hovering at a market cap of around $400 billion, that looks like a healthy growth rate.
Despite the strong growth on the bottom line, Netflix's top-line guidance indicated that revenue growth is expected to slow after 16% growth in 2025.
Investors also seem to be skeptical about the Warner Bros. Discovery acquisition, and Netflix said it would pause share buybacks in order to build cash to pay for the deal. In order to make the deal more appealing for WBD shareholders, Netflix changed its offer to an all-cash deal.
Netflix is now down 33% over the last three months, a period that includes a disappointing third-quarter earnings report, a broader sell-off in growth stocks in November, and a steady slide following the WBD deal announcement in early December.
Netflix doesn't give EPS guidance, but based on its operating margin forecast, the company is on track for roughly $3 in earnings per share in 2026, giving it a forward price-to-earnings ratio of 28. That puts it in line with the S&P 500's trailing P/E ratio.
Considering Netflix's steady growth, its dominance of streaming, and expansions into areas like advertising and new content like TV and podcasts, Netflix looks like a solid buy at the discount valuation.
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Jeremy Bowman has positions in Netflix. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
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