Stephanie Link has watched Netflix from the sidelines her entire career. That changed recently. The Chief Investment Strategist bought Netflix for the first time ever, and her reasoning cuts straight to the point.
“Why now? It’s a simpler story. Without the Warner Brothers Discovery acquisition. I didn’t really understand why they were going after that to begin with, but now you can focus on the fundamentals.”
That’s the whole thesis in three sentences. Here’s the reasoning behind a seasoned strategist’s first-ever Netflix position in Netflix (NASDAQ:NFLX | NFLX Price Prediction).
The WBD Overhang Is Gone
Netflix had been pursuing Warner Bros. Discovery in an all-cash deal at $27.75 per share, financed through a $42.2 billion bridge facility. The deal would have layered on significant debt, legacy cable baggage, and an integration nightmare that had nothing to do with what made Netflix great.
Then Paramount’s revised offer won out. Netflix walked away, pocketing a $2.8 billion termination fee in the process. Wall Street cheered. JPMorgan upgraded Netflix to Buy with a $120 price target, and the stock surged 15.3% in February 2026.
Link’s read is right: M&A uncertainty compresses multiples. Investors hate complexity. A Netflix chasing Warner Bros. Discovery’s linear TV assets is a completely different risk profile than a focused streaming company printing cash. The deal dying didn’t just remove a headline risk. It restored the investment thesis.
The Fundamentals Link Is Buying Into
Netflix’s underlying business is genuinely strong. Earnings are growing at 20%, revenues at 12-14%, and operating margin expansion is ahead.
In 2025, Netflix delivered $45.18 billion in revenue, up 15.85% year over year, with free cash flow of $9.46 billion, up 36.68%. The advertising business more than doubled in 2025 and is expected to roughly double again in 2026 to about $3 billion. The company holds 325+ million paid subscribers and captured 9.0% of US TV time in December 2025, an all-time high.
Co-CEO Gregory Peters framed the opportunity on the Q4 earnings call: “We are still under 10% of TV time in all major markets where we compete, with hundreds of millions of households around the world still to sign up. We’re just about 7% of the addressable market in terms of consumer and ad spend.”
The Valuation Argument
Netflix is currently trading around 30x earnings, below its historical average of 34x. Link noted that Netflix is currently trading around 30x earnings, below its historical average of 34x, while growing faster and generating more cash than in prior years.
The forward P/E sits around 30x against a trailing P/E of around 37x, signaling analysts expect meaningful earnings growth ahead. Analysts will be watching whether the multiple converges toward historical norms alongside earnings growth.
The buyback resumption adds another layer. Netflix has resumed buying back approximately $5.7 billion in stock, roughly 2% of market cap. This is a company that spent years burning cash to build its content library. It now generates enough free cash flow to fund content, grow the ad business, and return capital simultaneously.
Link’s decision to initiate a position after years on the sidelines came immediately after the WBD distraction was removed. Her reasoning centers on the business fundamentals and a cleaner story going forward.
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