Key Takeaways
- Bill Ackman called Netflix “an incredibly cheap stock” on CNBC’s Squawk Pod, after his fund sold out of most of its Alphabet stake and with Netflix down about 55% from its June 2025 high.
- Ackman says viewing hours are falling because Netflix’s content mix is changing, and Netflix’s churn improved year over year in the third quarter.
- Netflix trades at 17x forward earnings, about half its five-year average, while analysts expect earnings per share to keep rising through 2028.
- The main risk is that less viewing per member turns into cancellations, and January’s 2027 guidance is the next test.
Netflix (NFLX) stock is down about 55% from its June 2025 high, and Bill Ackman thinks the market is watching the wrong number.
On Election Day’s episode of Squawk Pod, the Pershing Square CEO explained why his fund sold Alphabet (GOOG): Google “got to a price where we thought the go forward return was kind of not attractive to us, which is why we sold.”
Then the hosts asked about Netflix. Pershing Square sold the stock in 2022 and bought it back this year.
“Netflix we like. Netflix we think is an incredibly cheap stock.”
He gave his reason just before CNBC rushed him off the air: “The market is focused on engagement, number of hours people spending on Netflix has come down. That’s because the mix of content is changing.”
That’s a whole bull case in two sentences.
Viewing time is falling fast
The bears have a number of their own. As Ed Elson put it on Monday’s episode of Prof G Markets, “average viewing time per member on Netflix has fallen 26% in the past three years.”
A lot of that time is going to Alphabet’s YouTube. On Animal Spirits, Ben Carlson pointed to a chart from Puck’s Julia Alexander that shows YouTube’s share of viewing at double Netflix’s. He said Netflix “is still experiencing basically no churn, at least compared to its peers.” But if people start canceling, he warned, it’s “going to be catastrophic for the stock.”
TIKR tracks 51 analysts on Netflix. How many say “Buy”?
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He has a point on price
Analysts expect Netflix’s earnings per share to climb to $4.51 in 2028, nearly 80% above 2025’s $2.53:
(This year’s estimate includes the $2.8 billion termination fee Netflix collected after it dropped its Warner Bros. Discovery bid, so the step up to 2027 looks smaller than it otherwise would.)
Even so, the stock trades at 17x forward earnings, a little over half its five-year average of 32x:
(In late 2021, it traded at nearly 60x!)
Those earnings come with real cash, too. Free cash flow went from a small outflow in 2021 to $9.5 billion in 2025:
Management expects about $12 billion this year.
Members are watching less and paying more anyway
Netflix’s own figures back up Ackman’s point about the mix. Management says live programming will take just over 5% of content spending this year and produce about 1% of view hours. Yet live events accounted for six of Netflix’s 10 biggest days for new sign-ups over the last five years.
So Netflix is paying for programming that brings members in, even when people spend relatively few hours watching it.
And the cancellations Carlson worries about haven’t shown up. Netflix said churn improved year over year in the third quarter, both globally and in the U.S. That came after it raised U.S. prices by 8% to 13% in March.
U.S. growth is the weak spot. Revenue in the U.S. and Canada rose 11% in the third quarter, inside the range of those price increases. Analysts have also cut their 2027 EPS estimate by 4.3% since Sept. 30, 2025, to $3.77.
I think Ackman’s right
At 17x forward earnings, Netflix is priced like a business that’s about to start losing members. So far, members are staying and paying more, and Netflix is turning more of that money into cash every year. That’s cheap to me, even if growth keeps slowing.
Of course, Carlson’s warning only has to come true once. Netflix gives its 2027 revenue and margin guidance in January, and its annual viewing report early next year will show whether U.S. hours have turned. If cancellations show up in either one, the low multiple will start to look deserved.
So what is Netflix stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
