Netflix at a 4.3% cash flow yield is the definition of value
u/Navelabob ·
Reddit — r/ValueInvesting
· July 18, 2026 at 16:00
· ⬆ 46 pts
· 💬 49 comments
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AI Summary
Summary
Author argues Netflix (NFLX) now offers a 4.3% FCF yield after a ~50% drawdown, making it a value play with growth optionality from ads and live events.
Thesis: Market is pricing in zero growth, but Netflix can still raise prices in line with inflation and its ads business is doubling YoY, so current valuation is attractive.
Quality assessment: Well-reasoned DD with specific valuation metrics (FCF yield, price drops, guidance context) and a defined entry strategy; not speculative noise.
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Netflix is a company pretty much everyone knows, especially in this sub. The stock has been hammered over the last few months, and it may have been for good reason this company at 40x earnings is overpriced. Well now we are down about 50% from there. Warranted? Maybe, but at today’s prices Netflix should be a stock on your radar.
Last quarter was largely in line with analysts expectations, the sell off was due in part to weaker than anticipated guidance and changing engagement disclosures from quarterly to once a year. They’re still projecting growth in the low teens, backed mainly by an ads business that doubled y/y.
At a 4.3% FCF yield the market is basically saying growth is done for good, you can expect revenue and earnings to cap around where they currently sit. Personally I don’t believe that’s true, Netflix still will be able to raise prices at least in line with inflation probably without significant customer churn, and their ads business and entry into live events could keep the growth going for a few years longer.
All that being said this isn’t a sexy stock, it’s boring and predictable with its revenue profile. The business isn’t broken, it may have been over priced but its quality. I am starting to sell puts at 65 to start nibbling and will get a lot more aggressive once I can get good premiums on 60 strikes, which would put their FCF yield closer to 5%. Better than a 10yr treasury and still has growth potential.
TLDR- Netflix been getting cooked, but it’s been a valuation problem rather than a business problem. Now that valuation has been reset, NFLX may deserve a spot on your watch list.
Netflix’s FCF yield is 4.3% at current price; stock down ~50% from peak; ads business doubled YoY; low-teens growth projected. At 4.3% FCF yield the market assumes permanent stagnation, but ads and pricing power support continued growth—creating a margin of safety. NFLX is a high-quality business trading at a deep discount; author is selling puts at $65 and plans to add more at $60 (5% FCF yield). Subscriber growth stalls, ad revenue disappoints, or competition intensifies; guidance could continue to weaken.