Wait for a dip to buy Netflix stock

We believe there is not much to fear in NFLX stock given its overall Strong operating performance and financial condition. But given its Very High valuation, the stock appears Relatively Expensive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: Netflix (NFLX) is a $518 Bil market cap company that provides diverse TV series, documentaries, films, and mobile games to 222 million subscribers across 190 countries since 1997.

[1] Valuation Looks Very High

This table highlights how NFLX is valued vs broader market. For more details see: NFLX Valuation Ratios

[2] Growth Is Strong

• Netflix has seen its top line grow at an average rate of 9.8% over the last 3 years
• Its revenues have grown 15% from $35 Bil to $40 Bil in the last 12 months
• Also, its quarterly revenues grew 12.5% to $11 Bil in the most recent quarter from $9.4 Bil a year ago.

This table highlights how NFLX is growing vs broader market. For more details see: NFLX Revenue Comparison

[3] Profitability Appears Strong

• NFLX last 12 month operating income was $11 Bil representing operating margin of 27.7%
• With cash flow margin of 19.8%, it generated nearly $7.9 Bil in operating cash flow over this period
• For the same period, NFLX generated nearly $9.3 Bil in net income, suggesting net margin of about 23.1%

This table highlights how NFLX profitability vs broader market. For more details see: NFLX Operating Income Comparison

[4] Financial Stability Looks Very Strong

• NFLX Debt was $15 Bil at the end of the most recent quarter, while its current Market Cap is $518 Bil. This implies Debt-to-Equity Ratio of 2.9%
• NFLX Cash (including cash equivalents) makes up $8.4 Bil of $52 Bil in total Assets. This yields a Cash-to-Assets Ratio of 16.1%

[4] Downturn Resilience Is Moderate

NFLX saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• NFLX stock fell 75.9% from a high of $691.69 on 17 November 2021 to $166.37 on 11 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 20 August 2024
• Since then, the stock increased to a high of $1,339.13 on 30 June 2025 , and currently trades at $1,211.64

 
2020 Covid Pandemic

• NFLX stock fell 22.9% from a high of $387.78 on 18 February 2020 to $298.84 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 13 April 2020

 
2008 Global Financial Crisis

• NFLX stock fell 55.9% from a high of $5.81 on 17 April 2008 to $2.56 on 27 October 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 March 2009

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NFLX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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