Technology stocks have taken a beating lately, with many speculating how AI could wipe out whole industries. Whenever investment firms make a move in the tech sector, investors look for clues to determine which companies could not only survive but also thrive in a changing world. One such move was made last week by Coatue Management, a technology-focused investment firm led by Philippe Laffont. According to 13F filings, the firm added 5.5 million shares of Netflix (NFLX), dramatically increasing its holdings from 618,735 in the third quarter to over 6.1 million shares by the end of Q4.
Netflix has a predictable cash flow owing to its subscription model, and the company has done well adapting to changing user preferences over the past decade. If AI is going to disrupt the entertainment industry, chances are that a financially strong company like Netflix, with a powerful brand name, is likely going to be the one driving the change. Billionaire Philippe Laffont certainly thinks so, and is not hesitating to put his money on Netflix as the quarterly update reflects.
Netflix provides a streaming platform to more than 300 million paid members in over 190 countries. The company was founded in 1997 by Marc Randolph and Reed Hastings and is headquartered in Los Gatos, California.
NFLX stock is down 15% over the last 12 months, but in the last six months, the stock has lost 32% of its value, giving back most of the previous gains from the beginning of 2025. This is in stark contrast to the S&P 500 ($SPX), which is up nearly 17% over the last 12 months
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Thanks to the dip in stock price, Netflix is trading at an attractive valuation. Its forward price-to-earnings (P/E) ratio of 24.3 times is just above the S&P 500’s forward P/E ratio of roughly 22.3 times. More importantly, compared to the stock’s own five-year average, this multiple offers a discount.
The forward EV/EBITDA is also attractive, while the forward price-to-cash flow ratio is at a staggering discount to the five-year average. Philippe Laffont won’t be the first investor to notice this. If NFLX stock’s downtrend continues, this ratio is going to become even more enticing. Considering how instrumental cash flows are to any business, it’s hard to see Netflix stock depreciating much further.
One warning sign for investors, however, could be the mounting debt. The company currently has total debt of $16.98 billion, which is hardly anything to worry about considering the company’s size and cash pile of $9.06 billion. However, Netflix’s recent bid to acquire Warner Bros could change this equation significantly, not to mention the antitrust scrutiny coming along with the deal. Netflix has a lot on its plate right now, which is why investors have been fleeing NFLX stock lately. The risk-reward currently on offer might come down to individual risk appetite at the end of the day. For Laffont, the reward is clearly worth the risk at the current price.
Netflix announced its fourth-quarter 2025 earnings on Jan. 20, narrowly beating consensus estimates. EPS came in at $0.56 versus the estimated $0.55, while revenue was $12.05 billion, just above expectations of $11.9 billion. The company reported $2.42 billion in net profits during the quarter, quite an improvement on the $1.87 billion in the same quarter last year.
Going forward, management is focused on improving the quality and variety of its content, which is a reasonable approach considering it is the core business of the company. As far as AI is concerned, Netflix is utilizing it at a faster pace than many may realize. When an average person thinks of AI in Netflix’s context, they think of AI-generated movies. But that’s not what AI is about. Netflix is improving user experience as well as ad targeting using artificial intelligence. This directly helps the company’s topline. On top of that, the firm is using the technology for pre-visualization, ideation, planning, and support in other processes involved in movie-making. While this doesn’t bring in direct revenue, it lowers the cost of making content, which is a big win for a niche that is very capital-intensive.
Analysts continue to be bullish on the Netflix stock with a consensus “Moderate Buy” rating. Out of 43 analysts, 25 rate it as a “Strong Buy.” Most recently, analyst Alicia Reese of Wedbush maintained a “Buy” rating along with a price target of $115. This target is close to the mean target price of $113.23, which offers about 37% potential upside from here.
For now, analysts and fund managers clearly believe AI is not going to disrupt Netflix’s business.
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On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
