Netflix reported strong second-quarter earnings with a 16% increase in sales and a 7% rise in operating margin. Despite a currency tailwind and lower content expenses, profits were driven by price hikes and member growth. However, long-term growth may slow in 2026, leading to an overvalued stock trading at 40 times earnings.

The company’s financial strength is evident with a net debt/EBITDA ratio under 1.0 and over $9 billion in free cash flow expected for 2025. Netflix’s narrow economic moat is supported by intangible assets and a network effect, giving it a competitive advantage in the streaming industry.

While Netflix faces high uncertainty due to evolving competition and rising consumer prices, bulls believe its large customer base and profitability will sustain growth. On the other hand, bears point to increased competition and the need for more content investment to drive membership and pricing.

Read more at Morningstar: After Earnings, Is Netflix Stock a Buy, a Sell, or Fairly Valued?