Bill Ackman of Pershing Square just told his investors he bought Netflix (NASDAQ:NFLX). The stock is down about 35% over the past year and 15% so far this year. Ackman said in his letter to investors that Netflix has already won the streaming wars.
The company has more than 325 million subscribers, almost double what its two biggest rivals have put together. He thinks the stock got cheap after falling from more than 40x forward earnings down to about 21x, mostly on the collapsed Warner Bros. Discovery bid and worries about slowing growth.
At around 20x forward earnings, the bulls think the market is fixated on the wrong number. Revenue growth is cooling toward the 12% Netflix guided for the third quarter of 2026. But the story now is monetization, not sign-ups.
Netflix already has its 325 million members. Bulls argue Netflix has more monetization power to make money from its subscription base. Advertising does most of the heavy lifting when it comes to monetization.
Netflix spent years running ads on Microsoft's technology, which meant no real control over targeting or pricing. That changed when it launched its own Ads Suite in the US last year. Ad revenue more than doubled last year.
The cheaper ad tier will help capture budget-conscious households. Pricing is also a tailwind, according to bulls. Netflix, Disney+, Hulu, and HBO Max now all sit in a similar range.
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