Growth investor Cathie Wood was surprisingly quiet last week, as the market raced to new highs. She lightened her stake on a pair of positions across her Ark Invest ETFs on Monday. She didn't make any trades on Tuesday or Wednesday. She pared back on a single holding on Thursday. It wasn't until Friday that Wood actually bought something, and Netflix (NASDAQ: NFLX) was one of just two existing positions that she added to on the final trading day of last week.

With Netflix shares plummeting nearly 10% on an otherwise buoyant trading day, Friday's price action stands out. Many aggressive growth investors prefer to buy stocks on the way up, but Wood doesn't usually behave like a momentum investor. Ark Invest often adds to positions on down days, even though the other stock she bought on Friday was a biotech soaring nearly 30% by the closing bell.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

Is Wood's contrarian stance on Netflix the right call? Let's take a look at some of the reasons why she could be wrong. I'll follow up with some reasons why investing in Netflix might be a smart thing to do.

Knock on Wood

On the surface, Thursday afternoon's fourth-quarter results were a blowout. The 16% increase in revenue through the first three months of this year was just ahead of the 15% that Netflix was targeting. Earnings soared 83% to $5.3 billion -- or $1.23 a share -- landing well ahead of what analysts and Netflix itself were modeling.

The numbers may look decent, but this wasn't a good report. It wasn't even a ho-hum report. Revenue rose just 14% on a foreign-exchange neutral basis. Was it really a top-line beat or just the lucky break of being on the right side of a weakening U.S. dollar over the past year?

The bottom-line beat is even more worthy of an asterisk. When Netflix initiated its first-quarter guidance in January, it didn't expect to be on the receiving end of a $2.8 billion payment from Warner Bros. Discovery (NASDAQ: WBD) as a buyout termination fee. The windfall after taxes inflated the quarterly performance.

Two other dings in the report were more obvious. Guidance was disappointing. Netflix didn't boost its full-year outlook, despite exceeding its first-quarter forecast and raising monthly subscription prices for U.S. users last month. The second-quarter guidance it initiated was another buzzkill, as the 13.5% year-over-year increase in revenue would be its weakest top-line gain over the past year. Its bottom-line outlook was short of Wall Street's profit target. With domestic prices rising in late March, the sting is particularly harsh.

Cathie Wood is doing some spring cleaning. The co-founder and CEO of Ark Invest lightened her stakes in more than three dozen stocks across her ETF family's holdings on Thursday. It was her busiest day of selling -- in terms of the number of companies she unloaded -- in months.

Some of the more intriguing names on that list of positions are Netflix (NASDAQ: NFLX), Broadcom (NASDAQ: AVGO), and Advanced Micro Devices (NASDAQ: AMD). In stark contrast, she only added to one stock: oncology and hereditary testing products specialist Tempus AI. I often spend time looking at her purchases, but this time I want to focus on her Thursday selling spree.

Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »

1. Netflix

Netflix stock has soared 10% since agreeing to terminate its deal to acquire Warner Bros. Discovery a month ago. It's a return made sweeter with the market down 6% in that time, but it's not just the stock of the leading premium video streaming service that's moving higher.

Netflix announced on Thursday afternoon that it would raise prices for U.S. users across its platform. If you were paying $17.99 a month for the standard ad-free plan, you'll be shelling out $19.99 now. The cheaper ad-supported tier that set subscribers back $7.99 a month is now a buck higher.

An increase isn't a surprise. Netflix has announced hikes in all but two of the past dozen years. Netflix has continued to grow its viewer base through the increases, but there is no such thing as indefinite pricing elasticity.

For now, investors should feel better about the price hike than Netflix subscribers do. If successful, the move should expand the service provider's already wide margins, given the model's scalability. The move should also help relieve the one pressure point in its latest financial results.

Netflix reported an 18% increase in fourth-quarter revenue back in January. This is its largest top-line jump in more than four years. The bottom line rose even faster, climbing a better-than-expected 30%. The quarter was great, but its guidance was problematic. Netflix sees revenue growth decelerating to between 12% and 14% this year, with an operating margin of 31.5% falling short of analyst expectations. This price hike -- if it can sustain its positive audience momentum -- should help remedy both of those guidance knocks. In this rosy scenario, Wood may be making a mistake by paring back her Netflix position.

Quick Read

• Netflix (NFLX) attracted aggressive buying from three major hedge funds in Q4 2025: Citadel Investors added 5.8 million shares (549% increase), Renaissance Technologies added 4.5 million shares (164% increase), and Coatue Management added 4.7 million shares (75.5% increase). The company’s full-year 2025 revenue reached $45.18 billion, up 15.85% year-over-year, with advertising revenue more than doubling to $1.5 billion and expected to roughly double again in 2026.

• Netflix’s collapsed Warner Bros. Discovery acquisition freed the company from capital-intensive integration, allowing management to refocus on organic growth, margin expansion, and returning capital to shareholders while the advertising business and premium valuation multiples drive institutional investors’ bullish positioning.

• The analyst who called NVIDIA in 2010 just named his top 10 AI stocks. Get them here FREE.

Three of the most closely watched hedge funds on Wall Street added aggressively to their Netflix (NASDAQ:NFLX) positions in Q4 2025 as the company's proposed acquisition of Warner Bros. Discovery (NASDAQ:WBD) collapsed. Ken Griffin's Citadel Investors added 5.8 million shares, a 549% increase; Jim Simons' Renaissance Technologies added 4.5 million shares, up 164%; and Philippe Laffont's Coatue Management added 4.7 million shares, up 75.5%. The timing is deliberate: each firm accumulated shares as deal uncertainty weighed on Netflix's valuation, positioning them ahead of a fundamental re-rating.

What Happened With the Warner Bros. Deal

Netflix announced an all-cash acquisition of Warner Bros. Discovery at $27.75 per share, backed by a $42.2 billion bridge facility. The deal was called off after Paramount's offer was deemed superior, triggering a breakup fee scenario and ending Netflix's most ambitious M&A push. Share buybacks had been paused to fund the deal, and approximately $275 million in acquisition-related expenses were already baked into 2026 guidance.

For many investors, the deal collapse was a relief. The Street quickly refocused on Netflix's standalone growth trajectory, and the upgrade cycle that followed was swift. Goldman Sachs upgraded Netflix to Buy with a $120 price target on April 7, citing stronger revenue growth, improved margins, and potential for greater shareholder returns. Morgan Stanley maintained its Overweight rating with a $115 target on April 9, pointing to easing concerns around engagement growth and margins. BMO Capital reiterated Buy with a $135 target on April 8.

READ: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks

Oakmark Funds, advised by Harris Associates, released its “Oakmark Fund” first-quarter 2026 investor letter. The objective of the fund is to deliver capital appreciation by investing in diverse large-cap US companies. A copy of the letter can be downloaded here. In the quarter, the Fund (investor class) outperformed the S&P 500 Index, returning -2.47% vs. -4.33% for the index. In addition, you can check the Fund’s top five holdings to determine its best picks for 2026.

In its first-quarter 2026 investor letter, Oakmark Fund highlighted Netflix, Inc. (NASDAQ:NFLX) as a newly established position. Netflix, Inc. (NASDAQ:NFLX) is a leading subscription-based streaming entertainment platform. On April 13, 2026, Netflix, Inc. (NASDAQ:NFLX) stock closed at $98.93 per share. One-month return of Netflix, Inc. (NASDAQ:NFLX) was 2.00%, and its shares gained 13.60% over the past twelve months. Netflix, Inc. (NASDAQ:NFLX) has a market capitalization of $418.51 billion.

Oakmark Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q1 2026 investor letter:

"Netflix, Inc. (NASDAQ:NFLX) is the leading streaming entertainment service with over 325 million subscribers and $45 billion of revenue. This scale creates a valuable moat, in our view. Netflix buys more content than its competitors in aggregate but pays less per subscriber, creating a valuable customer proposition as the business grows. Still, the stock declined significantly over the past several months as market participants focused on slowing engagement and the company’s approach to buy Warner Bros, creating an attractive buying opportunity in our view. We are confident that Netflix’s engagement remains strong and believed that the shares looked attractive with or without the acquisition. We find the business attractive as it is trading for its lowest relative valuation since 2022, a period that produced strong subsequent returns."

Netflix, Inc. (NASDAQ:NFLX) ranks 13th on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 146 hedge fund portfolios held Netflix, Inc. (NASDAQ:NFLX) at the end of the fourth quarter, compared to 154 in the previous quarter. While we acknowledge the potential of Netflix, Inc. (NASDAQ:NFLX) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

Netflix NFLX shares are overvalued, as suggested by a Value Score of C. The NFLX stock is trading at a forward 12-month price/sales (P/S) of 7.3X compared with the broader Zacks Consumer Discretionary sector’s 2.31X.

Netflix shares are trading at a premium compared with peers, including Disney DIS, Paramount Skydance PSKY and Amazon AMZN, shares of which are trading at a P/S multiple of 1.65, 0.34 and 2.69, respectively.

NFLX Stock’s Valuation

Image Source: Zacks Investment Research

Is Netflix worth buying at current prices? Let’s dig deep to find out.

NFLX’s Financial Discipline Bodes Well for Investors

Year to date, Netflix shares have dropped 3%, outperforming the broader sector’s fall of 7.9%. Shares of Amazon, Disney and Paramount Skydance have declined 10.2%, 15.2% and 31.5%, respectively, over the same time frame. Since dropping its deal to acquire Warner Bros. Discovery’s studio and streaming assets, Netflix shares have appreciated 7.5%, reflecting positive investor sentiment.

NFLX Stock’s Price Performance

Image Source: Zacks Investment Research

NFLX’s decision not to stretch its balance sheet to match Paramount Skydance's revised all-cash bid of $31 per share reflects financial discipline on the former’s behalf. As of Dec. 31, 2025, Netflix’s cash balance was $9.03 billion as compared with total debt of $14.52 billion. The company had streaming content obligations of $24.04 billion as of Dec. 31, 2025, with $11.53 billion due within the next 12 months.

Netflix continues to generate strong cash flow that boosts its liquidity position. Net cash generated from operating activities in 2025 was $10.1 billion compared with $7.4 billion in 2024. Non-GAAP free cash flow was $9.5 billion in 2025 compared with $6.9 billion in 2024. For 2026, the company now expects to generate free cash flow of roughly $11 billion, which assumes a cash content spend to content amortization ratio of roughly 1.1.

The company is now expected to focus on reinvesting in the business and then return excess cash to shareholders through repurchases. Netflix had paused share buybacks to fund the Warner Bros. acquisition. In the fourth quarter of 2025, Netflix bought back 18.9 million shares for $2.1 billion, leaving $8 billion under its existing share repurchase authorization.

Strong Engagement & Ad Business to Revive NFLX’s Prospects

Netflix now expects more healthy growth on an organic basis for 2026. The company reported 16% revenue growth in 2025, with advertising sales growing 2.5 times to $1.5 billion. Netflix expects this advertising business to roughly double again in 2026 to $3 billion. Netflix benefits from a healthy engagement level. In the second half of 2025, viewing hours increased 2% year over year, driven by a 9% rise in viewing of branded originals. With over 325 million paid memberships, Netflix is now serving an audience approaching one billion people globally.

The company continued to enhance its advertising technology capabilities. In 2025, Netflix began testing new AI tools to help advertisers create custom ads based on its intellectual property, with plans to build on this progress in 2026. Netflix also introduced automated workflows for ad concepts and used advanced AI models to streamline campaign planning, significantly speeding up these processes.

Expansion into newer content categories, including video podcasts and live events (World Baseball Classic in Japan), is expected to boost top-line growth. For 2026, Netflix now expects revenues between $50.7 billion and $51.7 billion. This represents 12% to 14% year-over-year growth (or 11% to 13% foreign exchange neutral growth). However, the growth rate is lower than the rate reported in 2025. The company is targeting a 2026 operating margin of 31.5%, up from 29.5% in 2025.

The S&P 500 has had a volatile year so far. However, the benchmark is up 4% in 2026 (as of April 17). And in the past three years, it has climbed a notable 72%.

But there's a monster stock that continues to crush the market. Over the past three years, this business has seen its shares soar 191%. And they have risen more than 5% in 2026.

Keep reading to learn what company this is and whether it belongs in your portfolio.

Despite ongoing economic uncertainty, it's business as usual for this industry pioneer

It seems not a quarter goes by that Netflix (NASDAQ: NFLX) doesn't report strong financial results. This is true even as the global economy deals with greater uncertainty.

For the first three months of 2026, the streaming service stock posted year-over-year revenue growth of 16%, better than internal expectations. Netflix is getting a small lift from its ad-supported tier, as advertising revenue is on track to total $3 billion in 2026, double last year's total. Management also said that hours streamed increased, even though the Winter Olympics grabbed a lot of attention.

Netflix recently implemented price hikes in the U.S. They "have gone well, reflecting the strong value we provide members," according to the 2026 first-quarter shareholder letter. This value proposition is bolstered by the company's latest initiatives. Netflix is showing more live events, has launched video podcasts, and is expanding into new gaming categories.

Profitability trends continue to be extremely encouraging, showcasing its scalable business model. Operating income jumped 18% in the first quarter to $4 billion, resulting in an operating margin of over 32%.

Is Netflix's current valuation compelling enough to buy shares?

For investors, growth might be the most important variable to focus on. Due to its size, it's unreasonable to expect Netflix to keep up the historical pace of its growth.

But management says that the business only commands 5% of global TV viewing time and that it has reached less than 45% of worldwide broadband households. There is still room to expand, although the gains will certainly decelerate in the future. It's telling that Netflix expects to generate $51.2 billion in revenue in 2026, which would translate to a 13.3% increase.

Even though the streamer's stock trades 26% below its peak, I view shares as being on the overvalued side of the equation right now, with a price-to-earnings ratio of 39. Netflix is a dominant force in the streaming landscape, but competitive intensity and slower growth mean the next decade will be more challenging than the last 10 years.

Quick Read

• Netflix (NFLX) trades at $98.97 compared to a $113.43 consensus price target, implying about 14.6% upside. The company reported Q4 2025 revenue of $12.05 billion, beating estimates, while its ad-supported business generated over $1.5 billion in 2025 and is expected to roughly double in 2026.

• Netflix walked away from its previously proposed acquisition after declining to match a higher competing offer, and management has since made it clear that large-scale M&A is not a priority. As a result, investors are now focused squarely on Netflix’s standalone growth, margins, and capital allocation.

• The analyst who called NVIDIA in 2010 just named his top 10 AI stocks. Get them here FREE.

Netflix (NASDAQ:NFLX) currently trades around $98.97, while analysts have a consensus price target of about $113.43, implying roughly 14.6% upside from current levels. The stock is down around 26% from its 52-week high in June.

Netflix operates the world's largest subscription streaming platform, serving over 325 million paid memberships across more than 190 countries. The company is layering advertising revenue, live sports, gaming, and a pending studio acquisition onto its core subscription engine.

Netflix Walks Away From Warner Bros. Deal. Here's What That Means

Netflix’s stock fell sharply earlier this year, dropping to a low near $77 in February 2026, due to concerns around its now-abandoned Warner Bros. Discovery deal.

READ: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks

The proposed acquisition would have been transformative and risky. Netflix agreed to pay $27.75 per share in an all-cash deal that implied roughly $42.2 billion in financing needs, alongside a total enterprise value near $82.7 billion for the assets. To fund the transaction, the company would have needed a large bridge financing facility. Investors quickly repriced the stock to reflect a more leveraged balance sheet and significant integration risk.

That overhang has now been removed. In late February, Netflix declined to raise its bid after Paramount Skydance increased its offer to $31 per share, valuing the full Warner Bros. Discovery business at around $110 billion. Netflix walked away from the deal and received a $2.8 billion breakup fee. Management has since reinforced that it is unlikely to pursue another major studio acquisition, with co-CEO Ted Sarandos emphasizing that Netflix is focused on building rather than buying.

With the deal now off the table, the investment narrative resets. Going forward, investors are likely to refocus on subscriber growth, pricing power, and margin expansion without the distraction of a large, debt-funded transaction.