Key insights
- The author expresses concerns about Netflix's valuation (38x PE implying 30% CAGR) and the departure of Reed Hastings, creating uncertainty despite its wide moat and strong margins. The author believes current valuation doesn't justify a buy rating, even considering its competitive advantages. This could negatively impact NFLX stock and potentially other high-growth tech stocks.
I've been watching NFLX for a while. I've friends working there and he attests Netflix's decent culture. It's a quite profitable business with 48% gross margin and ~30% operating margin. I know many people for whom Netflix is their last subscription to cancel, much like the Cable TV in the 80-90s. Quite wide moat!
What I don't like
- It's not cheap at all. 38x PE, on a 5 year DCF implied ~30% CAGR. That's not a easy task. - Reed Hastings is leaving the board. I over index the leadership's role. I think his leaving created huge uncertainty down the road.
More of my thoughts on the recent ER: https://dullbusiness.substack.com/p/nflx-q1-2026-strip-out-the-warner
Anyone has a strong buy thesis? I think at this valuation even the wide moat can't justify a clear buy.