NFLX · Netflix
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $70
Note written ·
Price against the kill line
11.2% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $70.00, on record since 11 November 2026. The shares are down 18.2% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $70, over the 50-day moving average and every November 2026 insider sale price, which would show the shares leading; or fourth-quarter revenue above the $13.4 billion guidance with 2026 ad revenue above about $2.7 billion.
Research onlyNot in the portfolio.
Key figures from the filings · Communication Services
Quarter to 30 September 2026, filed 21 October 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 12,874
- Revenue, change on a year (%)
- +11.8
- Gross margin (%)
- 52.8
- Operating margin (%)
- 34.6
- Free cash flow, four quarters ($M)
- 11,375
- Net cash, cash less debt ($M)
- −6,909
- Price to earnings (×)
- 17.3
- Enterprise value to sales (×)
- 5.3
All filed numbers
What Netflix reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 12,874 | +11.8 | 52.8 | 34.6 |
| first filed | 12,560 | +13.4 | 51.9 | 33.4 |
| first filed | 12,250 | +16.2 | 51.9 | 32.3 |
| first filed | 12,051 | +17.6 | 45.9 | 24.5 |
| first filed | 11,510 | +17.2 | 46.4 | 28.2 |
| first filed | 11,079 | +15.9 | 51.9 | 34.1 |
| Pre-tax income ($M) | 4,317 |
| Net income ($M) four quarters: 14,767 | 3,664 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −3.3 |
| Operating cash flow ($M) | 12,308 |
| Capital spending ($M) | 933 |
| Free cash flow ($M) | 11,375 |
| Cash and short-term investments ($M) | 8,223 |
| Debt ($M) non-current long-term debt plus short-term borrowings | 15,132 |
| Net cash, cash less debt ($M) | −6,909 |
| Deferred revenue ($M) +3.2% on a year | 1,780 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 29,286 |
| Market value ($M) | 255,208 |
| Enterprise value, market value plus net debt ($M) | 262,118 |
| Enterprise value to sales (×) | 5.3 |
| Enterprise value to operating income (×) | 16.8 |
| Price to earnings (×) | 17.3 |
| Price to book value (×) | 8.7 |
| Free-cash-flow yield (%) | 4.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 2.1% of shares outstanding sold short, 2.5 days of average trading to cover, +4.6% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $5.8M |
| 12 monthsfrom | $0 | $319.9M |
The thesis
Netflix's shares are more likely to lag the S&P 500 than lead it over the next three months. Members are using the service less and the 2026 ad revenue target was cut. Nothing scheduled before the fourth-quarter report can show a turn. That report and the 2027 outlook, expected around 20 January 2027, decide the call. Nielsen's combined September–October viewing-share release, expected around 20 November 2026, is the only check before then.
The shares closed at $62.69 on 12 November 2026. That is $0.70 above the 52-week closing low of $61.99 set on 28 October 2026, and 46.3% below the 52-week intraday high of $116.73 from 13 November 2025. Tradingpedia put Netflix at 17.3 times forward earnings with a 4.4% free cash flow yield at the 10 November 2026 close. At that multiple the market has already priced a slower-growth company. The open question is whether engagement steadies enough to hold it.
Company news since early November has been about programming and product. Netflix started a limited US test of an "AI Discover" tab on 4 November 2026. It ordered a "Stranger Things" prequel series for 2028 on 6 November 2026 and added a 150-film Korean collection on 10 November 2026. None of this changes reported numbers before January.
Bullish and bearish views on Netflix, Inc.
The bull case on Netflix, Inc. (NFLX), in brief: profit and cash flow grew strongly. The bear case: the ad target was cut.
Bull case
- Profit and cash flow grew strongly. Third-quarter 2026 operating income rose 37% to $4.5 billion, a 34.6% margin, on revenue up 12% to $12.9 billion. Diluted earnings per share (EPS) rose to $0.87 from $0.59, and free cash flow was $2.9 billion (shareholder letter, 20 October 2026).
- Buybacks reached a record. Netflix bought back 63.9 million shares for $4.8 billion in the third quarter, its largest quarter ever. It had $22.3 billion of authorization left (shareholder letter, 20 October 2026).
- Discovery is being rebuilt. The AI Discover tab recommends titles by mood and interest. It entered a limited US test on 4 November 2026 (company news) and is aimed at members who open the app less often.
- A new ad partner signed. Mercado Libre said on 28 October 2026 that it will start a partnership with Netflix in early 2027. The deal ties connected-TV ad campaigns to marketplace and payment results, ahead of ad-tier launches in 15 more countries planned from March 2027.
- Most brokers still rate it a Buy. MarketBeat counted 2 Strong Buy, 35 Buy, 17 Hold and 2 Sell ratings on 8 November 2026, with a consensus target of $89.14. MoffettNathanson reaffirmed its Buy rating with a $90 target on 21 October 2026.
- Members watch less but rarely leave. Research firm Antenna puts Netflix's US monthly cancellation rate at about 2%, the lowest among streamers (cited by Bloomberg News, 25 October 2026).
Bear case
- The ad target was cut. On 20 October 2026 Netflix lowered its 2026 ad revenue outlook to about $2.7 billion from about $3 billion, citing a slower rollout of ad-product features. It also cut its free cash flow outlook to about $12.0 billion from $12.5 billion (shareholder letter).
- Fourth-quarter guidance missed consensus. Netflix guided to $13.4 billion of revenue and $0.67 of EPS, against consensus of $13.52 billion and $0.73 (shareholder letter, 20 October 2026). The guided 26.0% operating margin includes about 1.2 points of job-cut costs.
- Members use the service less. Bloomberg News reported on 25 October 2026 that internal Netflix figures show members using the service on fewer days each month. Apptopia says US subscribers who did not open the app rose 16.6% from a year earlier in the third quarter.
- YouTube is taking TV time. Nielsen's August 2026 Gauge, published 22 October 2026, put Netflix at 7.7% of US TV viewing time, down from 7.8% in July. YouTube reached a record 15.8%.
- Executives sold the net shares from exercises. On 3 November 2026 co-CEOs Greg Peters and Ted Sarandos each exercised 54,388 options and had 27,076 shares withheld for tax at $62.34. Sarandos sold the remaining 27,312 shares at $66.20 on 4 November 2026, and Peters sold his 27,312 at $63.62 on 9 November 2026 (SEC Form 4 filings).
- The lowest target sits below the price. Wells Fargo, rated underweight, has a $57 target, the lowest published (TipRanks, 23 October 2026).
Price setup
The shares closed at $62.69 on 12 November 2026, down 19.8% over three months from $78.16 on 14 August 2026 (adjusted daily closes). The price sits below the 50-day moving average of $69.59 and the 200-day moving average of $80.60, both as of 12 November 2026. Both averages sit above the price, which describes a downtrend that has not reversed.
Closes from 5 November to 12 November 2026 ranged from $62.69 to $65.56. The 52-week closing low of $61.99 on 28 October 2026 is the nearest level below. A close under it would set a new low for the year. A sustained move back toward the 50-day average would be the first sign of the shares leading.
Insider sale prices fall inside that same range. Chief Financial Officer Spencer Neumann sold 9,253 shares at $66.15 and Chief Legal Officer David Hyman sold 5,727 at $64.55 on 4 November 2026, alongside Sarandos at $66.20. Peters sold at $63.62 on 9 November 2026 (SEC Form 4 filings). Director Bradford Smith sold 17,980 shares at an average $64.03 on 26 October 2026 under a pre-arranged Rule 10b5-1 trading plan.
The buyback is reducing the share count, so no new shares are coming to market. The next earnings report is about ten weeks away.
Catalysts ahead
- ~20 November 2026 (est.): Nielsen 'The Gauge' US TV viewing-share data for September and October 2026, released together. Shows whether Netflix's share of US TV time recovers toward July's 7.8% or keeps slipping from August's 7.7%; it is the first release under Nielsen's adjusted methodology, which may trim streaming shares.
- ~20 January 2027 (est.): Fourth-quarter 2026 results and 2027 outlook. Shows whether fourth-quarter revenue reaches the $13.4 billion guidance, whether 2026 ad revenue reaches about $2.7 billion, and what revenue growth and margin Netflix guides for 2027.
- ~1 March 2027 (est.): Start of ad-tier launches in 15 more countries. Tests whether the delayed ad-product rollout is back on schedule and whether partnerships such as Mercado Libre's add ad revenue in 2027.
What would change the view
A daily close above $70, over the 50-day moving average and every November 2026 insider sale price, which would show the shares leading; or fourth-quarter revenue above the $13.4 billion guidance with 2026 ad revenue above about $2.7 billion.
What it trades with
Netflix's shares move more on company-specific engagement and advertising news than on the broad mega-cap technology trade. Alphabet's YouTube is the competitor whose results matter most to the debate. Benzinga reported on 29 October 2026 that YouTube's living-room business earned more in one quarter than Netflix's full-year ad forecast. Disney is the other main comparison for streaming spending. Its managers were asked to target 20% annual cost savings (Benzinga, 3 November 2026).
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $12.9 billion, up 12% from a year earlier; operating income $4.5 billion, up 37%, a 34.6% margin; diluted EPS $0.87 against $0.59; free cash flow $2.9 billion. Netflix third-quarter 2026 shareholder letter (SEC 8-K Exhibit 99.1) · as of
- 2026 guidance: revenue $51.1 billion, operating margin 31.5%, free cash flow about $12.0 billion (from $12.5 billion), ad revenue about $2.7 billion (from about $3 billion). Netflix third-quarter 2026 shareholder letter (SEC 8-K Exhibit 99.1) · as of
- Fourth-quarter 2026 guidance: revenue $13.4 billion, operating margin 26.0% including about 1.2 points of job-cut cost, diluted EPS $0.67, against consensus of $13.52 billion and $0.73. Netflix third-quarter 2026 shareholder letter · as of
- Nielsen's August 2026 Gauge put Netflix at 7.7% of US TV viewing time, down from 7.8% in July, while YouTube reached a record 15.8%. Nielsen The Gauge, August 2026 release · as of
- Co-CEO Greg Peters sold 27,312 shares at $63.62 on 9 November 2026, the net shares left after a 3 November 2026 option exercise and tax withholding; co-CEO Ted Sarandos sold 27,312 at $66.20 on 4 November 2026. SEC Form 4 filings, 5 November 2026 and 10 November 2026 · as of
- Netflix repurchased 63.9 million shares for $4.8 billion in the third quarter of 2026, its largest quarter ever, with $22.3 billion of authorization remaining. Netflix third-quarter 2026 shareholder letter (SEC 8-K Exhibit 99.1) · as of
- MarketBeat consensus is Moderate Buy (2 Strong Buy, 35 Buy, 17 Hold, 2 Sell) with an average price target of $89.14. MarketBeat · as of
- At the 10 November 2026 close Netflix was valued at 17.3 times forward earnings with a 4.4% free cash flow yield. Tradingpedia, 11 November 2026 · as of
Sources
- Netflix Stock Faces Valuation Reset Despite Strong Cash · tradingpedia.com ·
- News Center > · nielsen.com
- tubefilter.com ·
- Netflix, Inc. $NFLX Shares Bought by Kimelman & Baird LLC · marketbeat.com ·
- PPC Land
Related · shared themes
IMAX
Imax
IMAX Corporation's shares are modestly more likely than not to beat the S&P 500 over three months on a record third quarter and a raised…
DIS
Walt Disney
The Walt Disney Company's shares look more likely to trail the S&P 500 than lead it, because a 14.2% three-month gain already prices in…
AMC
Amc Entertainment Holdings
AMC Entertainment's third quarter delivered $109.3 million of free cash flow with no rise in share count, so the shares are rated modestly…
IQ
iQIYI
iQIYI's shares are more likely to lag the S&P 500 over three months: revenue is shrinking, its micro-drama, AI and overseas pivot has no…