Is Netflix Stock's 7.3X PS Still Worth it? Buy, Sell, or Hold?

Netflix NFLX shares are overvalued, as suggested by a Value Score of C. The NFLX stock is trading at a forward 12-month price/sales (P/S) of 7.3X compared with the broader Zacks Consumer Discretionary sector’s 2.31X.Netflix shares are trading at a premium compared with peers, including Disney DIS, Paramount Skydance PSKY and Amazon AMZN, shares of which are trading at a P/S multiple of 1.65, 0.34 and 2.69, respectively.NFLX Stock’s Valuation Image Source: Zacks Investment Research Is Netflix worth buying at current prices? Let’s dig deep to find out.NFLX’s Financial Discipline Bodes Well for InvestorsYear to date, Netflix shares have dropped 3%, outperforming the broader sector’s fall of 7.9%. Shares of Amazon, Disney and Paramount Skydance have declined 10.2%, 15.2% and 31.5%, respectively, over the same time frame. Since dropping its deal to acquire Warner Bros. Discovery’s studio and streaming assets, Netflix shares have appreciated 7.5%, reflecting positive investor sentiment.NFLX Stock’s Price Performance Image Source: Zacks Investment Research NFLX’s decision not to stretch its balance sheet to match Paramount Skydance's revised all-cash bid of $31 per share reflects financial discipline on the former’s behalf. As of Dec. 31, 2025, Netflix’s cash balance was $9.03 billion as compared with total debt of $14.52 billion. The company had streaming content obligations of $24.04 billion as of Dec. 31, 2025, with $11.53 billion due within the next 12 months.Netflix continues to generate strong cash flow that boosts its liquidity position. Net cash generated from operating activities in 2025 was $10.1 billion compared with $7.4 billion in 2024. Non-GAAP free cash flow was $9.5 billion in 2025 compared with $6.9 billion in 2024. For 2026, the company now expects to generate free cash flow of roughly $11 billion, which assumes a cash content spend to content amortization ratio of roughly 1.1.The company is now expected to focus on reinvesting in the business and then return excess cash to shareholders through repurchases. Netflix had paused share buybacks to fund the Warner Bros. acquisition. In the fourth quarter of 2025, Netflix bought back 18.9 million shares for $2.1 billion, leaving $8 billion under its existing share repurchase authorization.Strong Engagement & Ad Business to Revive NFLX’s ProspectsNetflix now expects more healthy growth on an organic basis for 2026. The company reported 16% revenue growth in 2025, with advertising sales growing 2.5 times to $1.5 billion. Netflix expects this advertising business to roughly double again in 2026 to $3 billion. Netflix benefits from a healthy engagement level. In the second half of 2025, viewing hours increased 2% year over year, driven by a 9% rise in viewing of branded originals. With over 325 million paid memberships, Netflix is now serving an audience approaching one billion people globally.The company continued to enhance its advertising technology capabilities. In 2025, Netflix began testing new AI tools to help advertisers create custom ads based on its intellectual property, with plans to build on this progress in 2026. Netflix also introduced automated workflows for ad concepts and used advanced AI models to streamline campaign planning, significantly speeding up these processes.Expansion into newer content categories, including video podcasts and live events (World Baseball Classic in Japan), is expected to boost top-line growth. For 2026, Netflix now expects revenues between $50.7 billion and $51.7 billion. This represents 12% to 14% year-over-year growth (or 11% to 13% foreign exchange neutral growth). However, the growth rate is lower than the rate reported in 2025. The company is targeting a 2026 operating margin of 31.5%, up from 29.5% in 2025.2026 Earnings Estimate Revisions Positive for NFLX StockThe Zacks Consensus Estimate for 2026 earnings is pegged at $3.14 per share, up a couple of cents over the past 30 days, indicating 24.1% year-over-year growth. The consensus mark for 2026 revenues is pegged at $51.23 billion, indicating 13.4% year-over-year growth. Netflix, Inc. Price and Consensus Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote The consensus mark for first-quarter 2026 earnings is pegged at 76 cents per share, unchanged over the past 30 days, suggesting 15.2% growth year over year. The Zacks Consensus Estimate for first-quarter 2026 revenues is pegged at $12.17 billion, implying 15.4% year-over-year growth.NFLX Stock: Buy, Sell or Hold?Netflix’s revenue growth is slowing, as reflected by current guidance. Content spending is deliberately front-loaded in the first half of 2026, which the company says will pressure operating income early in the year before recovering in the second half. These factors, along with Netflix’s premium valuation, are concerning for investors in the near term.Netflix currently has a Zacks Rank #3 (Hold), suggesting that investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis Report Paramount Skydance Corporation (PSKY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks