Netflix

Netflix closed May 12, 2026 at $85.43 — down 36% from the November 2025 peak of $134 (post-10-for-1 split). The $359B market cap is the smallest among US streaming peers despite Netflix being the only profitable one at scale. The 17.6% 52-week-position means the stock is trading closer to its 52-week low ($75) than its high. The 2026 narrative shift: the ad-supported-tier story that drove the 2024 rerating is now mature enough to be measured, and the numbers are better than the bears expected.

The ad-tier inflection is real. Netflix disclosed 130M monthly active users on the ad-supported plan in Q1/2026 (up from 70M Q1/2025, and from 23M Q4/2023). Ad-tier revenue: $4.1B in Q1/2026, on track for $20B+ in 2026. Average ARPU on ad-tier: $11.50 — meaningfully above the $7.99 list price because of advertising revenue. The ad-tier ARPU is now within 25% of standard-tier ARPU ($14.99), and ad-tier subscribers are growing 5× faster.

The Q1/2026 print showed why the stock fell: paid net additions were 6.8M (vs. 8.5M consensus), and management warned about cricket-rights timing affecting Q2 subscriber growth. But the underlying revenue grew +16.2% to $11.4B, EPS +86% to $5.91 (already adjusted for split), and operating margin hit 31.5% (vs. 28% Q1/2025). The disconnect between strong financials and stock weakness suggests the market is pricing in a subscriber-growth slowdown that may not materialize.

Netflix's institutional ownership shifted notably in Q1/2026. Capital Group reduced its position by 4.2M shares (after the post-Q1 drop), while Pershing Square (Bill Ackman) added 1.6M shares in March 2026 — Ackman's reasoning in his quarterly letter: 'we believe the market is mispricing the ad-tier maturation cycle and writing off Netflix prematurely on a single-quarter subscriber number.' The contrarian buying-pattern is the cleanest smart-money signal.

Reed Hastings (co-founder, transitioned to Executive Chairman in 2023) still holds 2.1M post-split shares — 0.5% of the company. He has not sold a share since his original 2023 transition disposition. The Hastings hold is the most informative insider signal at the current $85 level. Greg Peters (co-CEO) bought 5,000 shares in February 2026 at $96 — a modest but symbolic open-market buy.

The notable absence: Berkshire Hathaway has never held Netflix (Buffett famously avoids the streaming and content industry as 'too hard'). Mass-tech-momentum funds (ARK, Tiger Global, Coatue) have all reduced positions since the 2025 peak, contributing to the technical sell-off pressure. The contrarian setup: long-term-quality holders accumulating versus momentum holders trimming.

Netflix trades at a forward P/E of 22.2, EV/Sales of 7.9, and EV/EBITDA of 19.2 as of May 2026. The comparable set is mixed: Disney (forward P/E 22, but profitless DTC), Comcast (forward P/E 8, structurally declining linear), Warner Bros Discovery (negative earnings). Direct comparables are essentially YouTube (privately within Google) and Disney+/Hulu (within Disney). Netflix's forward P/E of 22.2 is below the 5-year median of 28× despite operational improvements — implying multiple expansion potential. Wall Street median price target $114.56 (34% upside), with dispersion from $80 (Bernstein, engagement-decline bear) to $151 (Wells Fargo, ad-tier-scale bull). Sum-of-the-parts: standard-tier subscription revenue at $48/share (12× $28B at 22% net margin), ad-tier subscription + advertising at $36/share, content-IP and gaming optionality at $14/share — total $98/share intrinsic, 15% upside to current.

1. July 16, 2026: Q2/2026 earnings — ad-tier MAU progression and Q3 subscriber guidance are the key prints
2. September 2026: Cricket Champions Trophy India broadcasts launch — first full-quarter test of the cricket-rights revenue contribution
3. Q4/2026: NFL Sunday Ticket renewal discussions — if Netflix bids competitively, content-spend trajectory shifts higher

Netflix at $85 (post-split) is the kind of position I add to despite the headline negativity — the operating-margin expansion is real, the ad-tier scale is real, and the multiple is back at 2022 stress levels with a fundamentally improved business. The Pershing Square Q1/2026 addition was the catalyst that interested me. The risk is the engagement-decline trend (Nielsen share dropping) and the NFL/NBA rights cliff in 2027. If Netflix walks away from premium sports, the long-term competitive position weakens; if it bids, margin expansion slows. Either way, $85 is a price where you can hold through that decision. My add-trigger is below $78 (sub-21× forward, near 52-week low) which would be the high-conviction entry. For long-term holders, this is a position where the next 18–24 months have meaningful asymmetric upside.