Is Netflix Still Worth the Hype After a 9.5% Dip?

Ever find yourself wondering if Netflix stock is still worth the hype, or if it’s already priced for perfection? Let’s take a closer look at where things stand before you make your next move. Netflix has delivered an impressive 38.8% return over the past year despite a recent 9.5% dip in the last month, showing the stock is no stranger to both strong rallies and sharp pullbacks. Recent headlines around Netflix’s ongoing crackdown on password sharing and its global push into ad-supported streaming have kept investors buzzing, since these moves could reshape subscriber growth and revenue streams. Meanwhile, big content releases and renewed licensing deals continue to spark volatility in Netflix’s share price as the market digests what’s next. On our value score, which measures how often Netflix looks undervalued across six classic valuation checks, the company earns a 2 out of 6. As we break down the major valuation approaches, keep an eye out for the alternative angle we'll reveal at the end.

Netflix scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Netflix Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth by forecasting its future cash flows and reducing those numbers back to their present value using a discount rate. In other words, it tries to figure out what all of Netflix’s future profits are worth today for investors.

For Netflix, the most recent annual Free Cash Flow is $9.06 billion. Analysts supply estimates for the next few years, with projections showing strong growth. By 2029, Free Cash Flow is forecast to reach $20.57 billion. Analyst coverage leads the way for the first five years; numbers beyond that point rely on Simply Wall St's own long-range extrapolation techniques, which present a picture of steady upward momentum.

Based on these projections and the 2 Stage Free Cash Flow to Equity model, the estimated fair value for Netflix stock comes in at $866.29 per share. However, compared to Netflix’s current share price, the DCF outcome suggests the stock trades at a 27.4% premium, meaning it is significantly overvalued based on intrinsic cash flow fundamentals.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Netflix may be overvalued by 27.4%. Discover 876 undervalued stocks or create your own screener to find better value opportunities.NFLX Discounted Cash Flow as at Nov 2025

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Netflix.

Approach 2: Netflix Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a favored valuation tool when a company is consistently profitable, as it directly compares the price investors are paying to the company's actual earnings. For growth-oriented companies like Netflix, the PE ratio also reflects market expectations for future earnings growth, as well as the company’s risk profile. Higher growth typically justifies a higher PE, but higher risk can suppress it.

Story Continues

Currently, Netflix trades at a PE ratio of 44.8x. This is substantially higher than the entertainment industry average of 23.4x and also above the peer group average of 77.9x. While peer and industry benchmarks offer context, they do not capture Netflix’s unique potential, growth rate, or risks that come with its global expansion and heavy content investments.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio, calculated at 36.3x for Netflix, blends in factors like the company’s actual earnings growth, profit margins, scale, industry dynamics, and risk. This makes it more tailored than a simple industry or peer comparison, delivering a more nuanced valuation picture.

Comparing Netflix’s current PE ratio of 44.8x to its Fair Ratio of 36.3x reveals the stock is trading at a notable premium, suggesting investors are paying up in anticipation of even stronger performance ahead.

Result: OVERVALUEDNasdaqGS:NFLX PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1404 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Netflix Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. Instead of only focusing on numbers, Narratives allow you to add your own story of what drives Netflix’s future. Your assumptions on growth, margins, and risks become the foundation for your estimated fair value.

Think of a Narrative as a clear, dynamic bridge between the company’s evolving business story, your financial forecast, and a resulting valuation. This approach makes the thinking behind “buy,” “hold,” or “sell” decisions far more transparent and personal. Narratives are built right into Simply Wall St’s Community page, making it easy for anyone to visualize future possibilities and see how their viewpoint compares to others on the platform.

Narratives automatically update whenever new information comes in, such as fresh earnings or breaking news, so your viewpoint can adjust in real time. For example, one investor’s Narrative for Netflix might expect 25% margins and project a $1,600 fair value per share, while another more cautious forecast could lead to a fair value estimate closer to $750. This highlights how different stories and assumptions can lead to very different investment decisions.

For Netflix, however, we'll make it really easy for you with previews of two leading Netflix Narratives:

🐂 Netflix Bull Case

Analyst Consensus Fair Value: $1,350.32

Undervalued by approximately 18.3%

Projected annual revenue growth: 12.5%

Proprietary ad tech rollout and global content partnerships are expected to drive strong growth in subscribers, monetization, and margins. Investments in localized, high-quality, and AI-driven user experiences are set to boost engagement, retention, and operational efficiency. These factors support margin expansion despite industry headwinds. Key risks include intensifying competition, rising content and compliance costs, and the potential for global market saturation impacting long-term profitability.

🐻 Netflix Bear Case

Independent Valuer Fair Value: $797.74

Overvalued by approximately 38.7%

Projected annual revenue growth: 13%

Market dominance, ad-supported plans, and paid sharing are expected to fuel continued subscriber and revenue growth, while content costs are predicted to stabilize. Benefits of scale and disciplined expense management are projected to expand net profit margins toward 25% by 2029. However, the current valuation already prices in much of this upside. Risks include execution challenges on new business models and intense competition, with downside if user growth or ARPM (average revenue per member) fails to accelerate as expected.

Do you think there's more to the story for Netflix? Head over to our Community to see what others are saying!NasdaqGS:NFLX Community Fair Values as at Nov 2025

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NFLX.

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