Bill Ackman of Pershing Square just told his investors he bought Netflix (NASDAQ:NFLX). The stock is down about 35% over the past year and 15% so far this year.
Ackman said in his letter to investors that Netflix has already won the streaming wars. The company has more than 325 million subscribers, almost double what its two biggest rivals have put together. He thinks the stock got cheap after falling from more than 40x forward earnings down to about 21x, mostly on the collapsed Warner Bros. Discovery bid and worries about slowing growth.
So is he right?
The Bull Case
At around 20x forward earnings, the bulls think the market is fixated on the wrong number. Revenue growth is cooling toward the 12% Netflix guided for the third quarter of 2026. But the story now is monetization, not sign-ups. Netflix already has its 325 million members. Bulls argue Netflix has more monetization power to make money from its subscription base.
Advertising does most of the heavy lifting when it comes to monetization. Netflix spent years running ads on Microsoft’s technology, which meant no real control over targeting or pricing. That changed when it launched its own Ads Suite in the US last year. Ad revenue more than doubled last year. The cheaper ad tier will help capture budget-conscious households.
Pricing is also a tailwind, according to bulls. Netflix, Disney+, Hulu, and HBO Max now all sit in a similar range. Pay roughly the same price and Netflix hands you a lot more to watch, so the value case still lands.
That’s what Ackman highlighted in his letter. He said Netflix can “outspend” its rivals and invest more in great content.
Netflix can grow earnings in the low-to-mid teens even with revenue slowing. Consensus has EPS at $3.82 for fiscal 2027 and $4.58 for fiscal 2028. Games, live events, and Netflix House — real-world venues where fans can eat, shop, and walk through sets from hit shows — are long-term catalysts for the stock.
The Bear Case
Bears say streaming has matured, and the easy growth is gone. Netflix revenue rose 13.4% in the second quarter, down from 17.2% a year before, and the third-quarter guide of 11.7% would be its weakest quarter in three years.
Competition is the other worry. YouTube took the most US viewing time in 2025 at 12.6%; Netflix came second at 8.3%. Engagement is softening too. Daily viewing per member dropped 7%, to about an hour and 33 minutes. Keep that going and Netflix has less headroom to raise prices or pile on ads.
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