Netflix (NFLX): the world's leading streaming stock
2026-06-22 · By Lubin Danilo, founder of Lubin Investment
Netflix is the undisputed global streaming leader with 280 million subscribers, a free cash flow exceeding $6 billion, and a competitive advantage built on years of viewing data. The valuation is high, but it reflects a dominant position that is genuinely hard to dislodge. Here is my full analysis, without emotion.
- Netflix generates over $6 billion in free cash flow per year, with a margin around 20%.
- 280 million subscribers in 190 countries: a global reach no competitor has managed to replicate.
- The competitive advantage runs on data: every hour watched improves the recommendation algorithms.
- New growth levers: advertising (AVOD), live events (NFL games, boxing), mobile gaming.
- Valuation is high (30 times annual free cash flow), justified by the leading position and steady growth.
Why Netflix is not an ordinary stock
When I analyze a stock, I always start with the same q: does this company have a real competitive advantage, something that makes its position durably difficult to attack? That competitive moat is what I look for first. Netflix has one, and it is far more solid than most people realize.
The classic mistake is to look at Netflix only as a catalog of movies and shows. That is like reducing Google to a search engine. The real value of Netflix is an unmatched database of human viewing behavior. Every time 280 million subscribers hit pause, drop a series at episode two, or rewatch a documentary three times, Netflix learns something. That data feeds recommendation algorithms that nobody else can replicate, because nobody else has had this user base for this long.
How I assess Netflix's financial quality
I never trust accounting profit to judge a business. It is too easy to manipulate through amortization, provisions, and write-offs. What I care about is free cash flow: the money that actually stays in the bank after the company has paid everything it needs to, including investments. For Netflix, that figure exceeded $6 billion in 2024. That means after producing hundreds of hours of original content, paying servers and staff, there was $6 billion in pure cash left over.
The free cash flow margin is a ratio I watch closely: it divides that cash by total revenues. Netflix sits at roughly 20%, and that margin is rising. For every $100 in revenue, $20 ends up as available cash. That is the hallmark of a mature business that has passed the heavy investment phase and is beginning to convert its scale into real profits.
The valuation: high, but not arbitrary
To measure what the market is willing to pay for a stock, I use the P/FCF ratio: the stock price divided by the free cash flow it generates each year. A P/FCF of 10 means you are paying ten years' worth of that cash. The lower this number, the cheaper the stock. Netflix trades at a P/FCF of roughly 30. That is high. The honest question I have to ask myself: is it justified?
My answer is yes, for three concrete reasons. First: Netflix is the absolute leader in a growing global market. 280 million subscribers in 190 countries, revenue growing at 15% per year, and an international expansion that is not finished (India, Latin America, Africa). Second: free cash flow is accelerating, not stagnating. Third: Netflix is aggressively buying back its own shares, which increases the value of each remaining share. This is not a company wasting its cash; it is a company using it to reward shareholders.
New growth levers the market underestimates
Most analyses of Netflix stop at subscription revenue. That is a mistake. Netflix is building several new growth engines that did not exist three years ago.
The first is AVOD: a lower-priced subscription tier funded by advertising. This model opens Netflix to tens of millions of people who found the standard subscription too expensive, while generating additional advertising revenue. The second lever is live events: Netflix broadcast NFL games on Christmas Day 2024, boxing matches, and special events. That is entirely new territory for a streaming platform. The third, less visible lever is mobile gaming: Netflix already offers dozens of ad-free games included in the subscription. Not yet a major revenue driver, but a real option with genuine long-term value.
Risks I do not minimize
An honest analysis does not hide risks. Netflix has several that I monitor actively.
The most immediate risk is subscriber saturation in Western markets. In Europe and North America, subscriber growth is slowing. The next decade of growth depends on emerging markets, which have lower purchasing power and strong local competition. The second risk is the cost of original content. Producing quality films and series costs billions every year. If Netflix loses one or two costly bets, its margins suffer. The third risk is competition: Disney+, Max, and Apple TV+ have considerable resources and strong exclusive content (Marvel, Star Wars, HBO, Apple Originals). The streaming war is not over.
Finally, Netflix still carries bond debt from its years of heavy investment. This is not a critical risk today, since cash flow comfortably covers debt service, but it is a factor to keep in mind if financial conditions deteriorate.
Streaming platform comparison
| Platform | Subscribers (approx.) | Global reach | Positive FCF | Advertising (AVOD) |
|---|---|---|---|---|
| Netflix (NFLX) | 280 M | 190 countries | Yes ($6+ B) | Yes |
| Disney+ / Hulu | ~150 M | ~50 countries | In progress | Yes |
| Max (Warner) | ~100 M | ~65 countries | Partial | Yes |
| Apple TV+ | Not disclosed | Worldwide | Not separated | No |
| Amazon Prime Video | ~200 M | 200+ countries | Not separated | Yes (recent) |
How I use a quality score in my analysis
In my analytical method, I always start by evaluating business quality independently of price. I look at concrete financial criteria: are revenues and free cash flow growing steadily? Is the company buying back its own shares rather than diluting shareholders? Is debt under control? Are margins improving? On these combined criteria, Netflix earns the maximum quality score in my screener. This is not a subjective opinion: it is the numerical translation of its financial results.
But a perfect quality score does not mean "buy immediately." It means the business quality is there. The second question, which I treat separately, is price. That is where the P/FCF comes in. Netflix is an elite business, and its price reflects that. The real decision depends on your conviction about its ability to sustain 15% annual growth over the next five years.
My view on Netflix, without a bet or emotion
Netflix is the kind of company I deeply respect: it has built something genuinely difficult to replicate, it generates growing amounts of cash, and it uses that cash intelligently. The question is not whether Netflix is a good business. It clearly is. The question is what price you are willing to pay.
At a valuation of 30 times its free cash flow, the stock already prices in a lot of good news. If Netflix continues on its current trajectory, with 15% annual growth and improving margins, this valuation level is reasonable for a global leader. If growth disappoints, or competition intensifies faster than expected, the margin of safety is thin.
Being able to answer that kind of question in seconds, for any stock, is exactly why I built my analysis platform. You can find the full Netflix breakdown on <a href="/analyse/NFLX">the dedicated NFLX page</a> or explore other stocks with <a href="/analyser">my analysis tool</a>.
FAQ
What is free cash flow, and why does it matter for Netflix?
Free cash flow is the money that actually stays in Netflix's bank account after paying all its expenses, including content production. Netflix generated over $6 billion in 2024. It is harder to manipulate than accounting profit, making it the most reliable indicator of a company's real financial health.
How should I interpret Netflix's P/FCF of 30?
The P/FCF (price-to-free-cash-flow) measures how much the market pays for every dollar of free cash flow. A P/FCF of 30 means investors accept paying 30 years of current cash flow to own one share. That is high, but it reflects a global leader whose cash flow is accelerating. A high valuation is not inherently bad if the growth story holds.
What sets Netflix apart from Disney+, Max, and Apple TV+?
Netflix has several structural advantages: 280 million subscribers in 190 countries versus 50-65 countries for its closest rivals, positive and growing free cash flow, and years of viewing behavior data that power uniquely effective recommendations. Disney+ and Max have strong catalogs, but neither matches Netflix's international reach or profitability today.
What are the key risks to watch on Netflix stock?
Three main risks: subscriber saturation in Western markets forcing reliance on lower-income emerging markets, the high and ongoing cost of original content production, and competition from platforms backed by major studios (Disney, Warner, Apple). These risks are real, but Netflix has been navigating them for years with solid execution.
What is AVOD and why is it an important lever for Netflix?
AVOD stands for Advertising Video On Demand. It refers to the lower-priced subscription tier funded by ads. Netflix launched this option to reach more price-sensitive market segments. It is a double lever: it grows the subscriber base while generating advertising revenue that Netflix had not captured before 2022.
Voir l'analyse NFLX sur Lubin Investment
About the author
Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).