In 2025, Netflix saw strong double-digit revenue growth, with revenue hitting $45 billion and 325 million global subscribers. Its operating margin also expanded significantly. Looking ahead to 2026, management expects more top-line growth and margin expansion. Despite this, the stock is down 10% since the start of 2025 and 40% from a summer high.

Netflix’s stock valuation is a bit pricey, with a price-to-earnings ratio of about 32. However, its forward price-to-earnings ratio, which is around 26, reflects analysts’ forecasts for the company’s earnings growth. Management projects revenue to grow 12% to 14% in 2026, with operating margin expanding to 31.5%.

Competition in the streaming industry remains intense, with Netflix facing challenges from various platforms like YouTube, Amazon, and Apple. Management acknowledges the competitive landscape and the need to adapt to changing consumer behavior patterns. Despite its financial momentum, Netflix’s stock may not offer enough margin of safety considering the competitive threats it faces.

Investors should carefully consider Netflix’s current valuation and competitive landscape before buying the stock. The Motley Fool Stock Advisor team has identified 10 stocks with potential for significant returns, with Netflix not being one of them. Past recommendations from the team have yielded substantial returns, outperforming the S&P 500 by a wide margin.

Read more at Nasdaq: Netflix Stock Dips Below $80. Time to Buy?