QS Research · Michael Burry's Scion Capital analyst template · 2006
NETFLIX INC (NFLX)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +0% · downside -20% · upside +4%
At $63.41 the market capitalizes TTM operating EBITDA of $15.96B at 16.8x EV/EBITDA and $49.73B revenue at 5.37x EV/Sales, while FCF is $11.38B and buybacks are $12.86B TTM; on today's multiple the base value is (16.8x × $15.96B − $6.91B net debt) / 4,106.33M shares = about $63.6, essentially today's price. A 20% EBITDA stress gives (16.8x × $12.77B − $6.91B) / 4,106.33M = about $50.6 (-20%), and the FY2026 guide ($51.1B revenue × 31.5% operating margin + ~$0.39B D&A) gives an EBITDA of ~$16.49B and a value of about $65.8 (+4%), so the stock is not yet a deep-value long under the rule. What the market may be missing is that Q3 operating margin and cash generation remain strong and the reported P/E of 17.6x is flattered by the $2.8B WBD termination fee, but the ad-revenue cut, decelerating growth and engagement questions make the problems more than a one-quarter sentiment issue. I would watch for evidence that operating EBITDA can grow enough to lift the base case to +30% while keeping downside within -25%.
Key numbers
- Share price: $63.41
- Market cap: $260.38B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $49.73B
- EV / EBITDA (TTM): 16.8x
- P/E (TTM): 17.6x
- Price / book: 8.89x
The 15 boxes
- ✓ 1. Long-form business notes
Netflix is a single-segment subscription business: revenue is monthly membership fees for streaming TV series, films, games and live programming, with no advertising-only or DVD segment disclosed in the FY2025 10-K. Between the FY2020 10-K and the FY2025 10-K the model changed from an ad-free, DVD-plus-streaming service with ~204 million paid memberships to a plan-laddered service that includes an ad-supported tier, games and live content, with 16,000 employees versus 9,400. The XBRL record shows revenue rising from $25.00B (FY2020) to $45.18B (FY2025) and operating income from $4.59B to $13.33B, with operating cash flow of $10.15B and $9.13B of buybacks in FY2025.
- ✓ 2. Competitive advantage
Netflix has scale and a profitable history: revenue grew from $25.00B in FY2020 to $45.18B in FY2025, operating income from $4.59B to $13.33B, net income from $2.76B to $10.98B and operating cash flow from $2.43B to $10.15B. The 10-K nonetheless describes an intensely competitive market with rivals that have large customer bases, strong brands, exclusive content and significant resources, and risk factors say content costs are largely fixed. The sources support scale, brand and original programming as advantages, but they do not establish a durable moat; they also flag licensing reliance, regulation and piracy as competitive pressures.
- ✓ 3. 10-Q takeaways
Q3 2026 was a clean beat on margin: revenue $12,874M (+12% reported, +11% F/X neutral) with operating income $4,459M (+37%) and a 34.6% operating margin versus 28.2% in Q3 2025, helped by lapping a $619M Brazil non-income tax charge in the prior-year quarter and by expense timing. Net income of $3,664M is essentially operating, because the $2.8B WBD termination fee sits in Q1 2026, not Q3. Cash generation stayed strong (Q3 operating cash flow $3,162M, free cash flow $2,884M) while the company bought back $10.7B of stock in the nine months to September 2026. Guidance is numeric and slightly mixed: FY2026 revenue $51.1B (+13%) and 31.5% operating margin, but Q4 margin guided down to 26.0% on headcount-reduction costs and 2026 ad revenue cut to ~$2.7B from ~$3B.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.