1 Screaming Buy Value Stock Hiding in Plain Sight

The artificial intelligence (AI) bull market has driven investor eyeballs away from other pockets of the market. Many stocks that the financial media used to discuss daily are now forgotten in favor of the latest semiconductor business that's considered an AI beneficiary and up 100% in a month.

Netflix (NASDAQ: NFLX) is down 42% from its highs, and the former stock market darling is one that's discussed much less today than in previous years. Yet the streaming TV giant keeps growing earnings year after year. Does that finally make the stock a buy for value investors?

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Steady global growth

For the streaming video giant, it all comes down to growing global watch hours. If it can get more customers to watch movies and shows on Netflix, it can charge more for monthly subscriptions and serve them more ads. There is a balance between quality and quantity -- Netflix is not a place where anyone can upload a video like on YouTube -- but generally, the more you can watch on Netflix, the better.

Continued investments in video content from the United States and other global regions have steadily expanded Netflix's library, setting it apart from the competition. Now, it is embracing new forms of video, such as live sports, live events, and talk shows and podcasts, hosted exclusively on Netflix.

When you combine this consistent reinvestment along with the growing share of streaming versus traditional TV and Netflix's current embrace of advertising revenue, it's no surprise to see revenue up 71% cumulatively in the past five years. Last quarter (ended March 31), revenue was up 16% year over year, with advertising revenue expected to double in 2026 compared with 2025.

Is AI a threat to Netflix?

If the financial performance has been so rock solid, you might be wondering why Netflix stock is down 42% from its highs. Investors are bearish on Netflix because of the rise of AI content that could make it easy for everyday people to copy the content Netflix spends tens of billions on every year. While this is clearly something to keep track of, Netflix is much more technology-forward than other streaming services and recently acquired an AI start-up to help make the post-production process more efficient. If any of the streaming services are going to adapt to the age of AI, it will be Netflix.

The other reason investors are bearish on Netflix at the moment is that it's losing share of watch hours to YouTube in the United States. YouTube currently accounts for 13.2% of all TV viewing hours in the United States, compared with 8.2% for Netflix. This concern is overrated, though, since not all viewing hours are of the same value, such as a low-budget YouTube video in the background compared with a sit-down movie experience on Netflix.

NFLX Revenue (TTM) data by YCharts

Why the stock could be a screaming buy

This stock price drawdown has given investors a nice entry point for Netflix, a business that has grown through all sorts of competitive pressures over the years, with steadily expanding profit margins.

Revenue is still growing in the double digits and should continue to do so as TV streaming slowly gains adoption around the world, along with the massive growth potential Netflix has in advertising.

This year, Netflix is guiding for around $51 billion in revenue and an operating margin of 31.5%. That equates to an operating profit of $16 billion, or just 20 times its current market cap of $325 billion. On top of this earnings growth, management has begun to aggressively repurchase stock, with shares outstanding now down 5% in the past five years.

If Netflix can keep on its steady march of revenue growth, investors will be well rewarded by buying the dip today in this period of heightened pessimism.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.