Key Takeaways
- • Bill Ackman called Netflix "an incredibly cheap stock" on CNBC's Squawk Pod, with the stock down about 55% from its June 2025 high, after Pershing Square sold most of its Alphabet stake.
- • Netflix trades at about 17x forward earnings, roughly half its five-year average of 32x, while analysts expect EPS to rise from $2.53 in 2025 to $4.51 in 2028.
- • Netflix reported year-over-year churn improvement in the third quarter, globally and in the U.S., following U.S. price increases of 8% to 13% in March.
- • The central risk is that declining viewing hours per member convert into cancellations; Netflix's January 2027 guidance and its annual viewing report are the next tests.
Summary
Bill Ackman, CEO of Pershing Square, described Netflix as "an incredibly cheap stock" on CNBC's Squawk Pod, according to the TIKR.com article reviewing his remarks. Netflix (NFLX) is down about 55% from its June 2025 high. Ackman's comments came as he explained that Pershing Square sold its Alphabet (GOOG) stake because the expected forward return no longer looked attractive. Pershing sold Netflix in 2022 and repurchased it earlier this year.
Ackman argued that the market is fixated on engagement, noting that hours spent on Netflix have declined because the content mix is changing. Bears point to the same trend: Ed Elson, on Prof G Markets, cited a 26% drop in average viewing time per member over three years, with a significant share of that time shifting to YouTube. Ben Carlson, on Animal Spirits, warned that if cancellations rise, the impact on the stock would be "catastrophic." He also noted that Netflix currently shows little churn relative to peers.
Valuation is central to the bull case. Analysts expect EPS of $4.51 in 2028, nearly 80% above 2025's $2.53, though the 2026 estimate includes a $2.8 billion termination fee from Netflix's dropped Warner Bros. Discovery bid. At 17x forward earnings, the stock trades well below its five-year average of 32x. Free cash flow rose from a small outflow in 2021 to $9.5 billion in 2025, and management expects about $12 billion this year.
Netflix's own data supports part of Ackman's thesis. Management said live programming will account for just over 5% of content spending this year and about 1% of view hours, yet live events drove six of Netflix's 10 biggest sign-up days over the past five years. Churn improved year over year in Q3, and U.S. and Canada revenue grew 11% in the quarter, within the range of the March price increases. Analysts have cut their 2027 EPS estimate by 4.3% since September 30, 2025, to $3.77. Netflix's January guidance and its early-next-year viewing report will show whether U.S. viewing and cancellations have deteriorated.
Ackman argued that the market is fixated on engagement, noting that hours spent on Netflix have declined because the content mix is changing. Bears point to the same trend: Ed Elson, on Prof G Markets, cited a 26% drop in average viewing time per member over three years, with a significant share of that time shifting to YouTube. Ben Carlson, on Animal Spirits, warned that if cancellations rise, the impact on the stock would be "catastrophic." He also noted that Netflix currently shows little churn relative to peers.
Valuation is central to the bull case. Analysts expect EPS of $4.51 in 2028, nearly 80% above 2025's $2.53, though the 2026 estimate includes a $2.8 billion termination fee from Netflix's dropped Warner Bros. Discovery bid. At 17x forward earnings, the stock trades well below its five-year average of 32x. Free cash flow rose from a small outflow in 2021 to $9.5 billion in 2025, and management expects about $12 billion this year.
Netflix's own data supports part of Ackman's thesis. Management said live programming will account for just over 5% of content spending this year and about 1% of view hours, yet live events drove six of Netflix's 10 biggest sign-up days over the past five years. Churn improved year over year in Q3, and U.S. and Canada revenue grew 11% in the quarter, within the range of the March price increases. Analysts have cut their 2027 EPS estimate by 4.3% since September 30, 2025, to $3.77. Netflix's January guidance and its early-next-year viewing report will show whether U.S. viewing and cancellations have deteriorated.
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