Netflix is a buy/hold; the 26 PE ratio is fair given the advertising segment's growth to $3 billion and steady financials, contradicting the market's view that growth is finished.

Netflix is really, really hard hit, 35% below.

Now the next stock is Netflix. Netflix has been an absolute very very difficult stock to be an investor in. The PE ratio is still 26. So if you think about it, the PE ratio is not super low, okay?

But Netflix has very consistent cash flow. The only issue is and the reason why the stock is down is because they're not getting as much user growth, including internationally, which is a huge problem.

Investors see that as a massive problem because essentially the growth is not as growthy anymore.

So, the business is totally worth $344 billion roughly as I'm making this video, down 35% from its 52- week high. The biggest draw down of any profitable name on this list. Okay, so 52- week range is from $65 to $127.

You can see here as of September 4th, the stock is trading for $78 per share.

Luckily, I have not really had the stock up until around the low8s. So, I am currently slightly down on Netflix, full transparency, but it's still early. I'm only in it for a little bit.

And obviously, you know, I would not call it a mistake. I'm just so far down. That's normal part of investing.

So, the argument against Netflix is really everywhere. And again, that main argument is that growth is done. Growth is over. Everyone who wanted Netflix already has Netflix. That's essentially the argument that's being made.

So, let me show you the other side of that, guys, because something isn't really matching up. The stock fell about 50% a year, yet the financials actually keep getting better. So yes, from a growth perspective, yeah, it's not really growing as much, especially internationally.

But from a financial perspective, projected revenue 51 billion to 51.4 billion represents 13 to 14% year-over-year growth. Operating margin is very healthy, projected at 31.5%.

Advertising revenue, again, Netflix has advertising business as well. So, not just Uber, but Netflix as well has advertising business. So, it's expected to roughly double to approximately $3 billion.

Okay, that's huge. Now, free cash flow is projected to be around $12.5 billion. Free cash flow is incredibly important to a business and operating income growth is anticipated at 20% plus for the year.

So 2026 quarterly performance highlights Q1 2026 revenue reached 12.25 billion. Q2 2026 revenue came in at 12.56 billion. So growth is very very steady

and on top of that you guys have probably seen this guy Mr. Bill Aman he has a stake in Netflix. So his fund Ping Square recently disclosed a return to Netflix by repurchasing 3 million shares about 4.9% portfolio stake signaling renewed long-term confidence in the streaming giants market dominance.

So, this is not my main thesis. I don't make my main thesis based off of activist investors anymore. But I do think that this is a positive sign because Acman has had a good track record.

He has had a good track record over history. Definitely volatility, but good track record.

Now, the two things that changed. So, password sharing changed for Netflix. For years, millions of people watch Netflix on someone else's account for free and Netflix turned those viewers into buyers.

So I know this is slightly old news but I just want to point out that is still a thing that is benefiting them because now they don't have any free riders but still important to mention for those who don't know

advertising is the main component why I am so bullish on Netflix. They have a cheaper tier which is subsidized by ads and it does two jobs at once. It catches the price sensitive viewer who was about to cancel and now they want a cheaper price but also sells that viewer's attention on top.

So Netflix knows what you watched and when you stopped watching it, when you started, how long you're watching, they have all that data on you. And whenever you're finishing at 2 a.m., they know that.

So they pretty much know when to advertise to you, how to advertise to you, and that's why Netflix ad revenue is set to hit $3 billion in 2026.

Advertisers are noticing that Netflix has strong ROI, so they're willing to pay money for that. So this is the most valuable ad targeting data in television. Nobody else in streaming has both scale and that type of data.

So ad revenue is extremely important to pay attention to. And again, it's basically 100% margin whenever you're looking at ad revenue.

Now, here's the AI part. So recommendations on Netflix are increasingly improving. So if you open Netflix and recommends you shows and movies that you aren't interested in, you close the app and then you open up YouTube.

They don't want that happening. So now they're integrating AI to get their cost down and revenue up even more.

But let's get into the price. So the 26pe ratio for a business that raised prices, added a whole advertising segment and converted millions of freeloaders into subscribers. I think 26 PE ratio is actually very fair for Netflix.

So basically the market decided that Netflix is finished growing and they put a finished growing price on it. And I just disagree with that. I disagree with that and I'm holding on to Netflix.

So I think this is a huge opportunity for investors.

Now the flip side is that content spending never stops. Every year billions out the door and no guarantee any of it really works. Netflix has to spend a ton of money specifically to the top actors.

They're very expensive. Um you know actors that even get a few minutes of screen time can be hundreds of thousands of dollars or even millions of dollars. So actors get paid very very well and content spending in general creating you know their original series and stuff costs a lot of money.

So one bad slate and the churn numbers move for sure whenever there's something bad people you know can complain cancel whatever right so competition is real and um the company is very you know wellunded but it's very expensive at the same time

the competition is Disney Amazon yes YouTube and short videos like Tik Tok which is people are spending a lot of time on Tik Tok Tik Tok's very very addictive so YouTube is the genuine threat here though which I like that because I'm here on YouTube I only make videos on YouTube.

So, YouTube is uh pretty much free infinite and the algorithm is very good. So, you can actually see that Netflix is losing a little bit and YouTube continues to grow. So, that is one of the downsides to Netflix.

However, a lot of people are going to have their Netflix subscription anyways. Even if they spend time on YouTube, they could spend time on both. And Netflix doesn't necessarily care that much because they do get a stable monthly subscription.

So again, I think YouTube and Netflix can coexist together and there's time for watching movies at a time and there's also time for watching YouTube videos and they are slightly different, but I think they're going to merge and be more similar, but again, I think the market is going to be fine for both.

Uh Netflix is higher, AMD is higher and then Iran is obviously we don't have a PE ratio, but when they do become profitable, I rent is going to have a high PE ratio.

For others, like Netflix, I'm buying LEAP options. And when I announce my new LEAPS challenge, that'll also be a stock that I plan to do a LEAP option on.