Netflix Is 43% Below Its 52-Week High at 20 Times Forward Earnings. Where Will the Stock Be in 3 Years?

Netflix (NASDAQ: NFLX) trades at $72.39 as of this writing, down about 43% from its 52-week high of $126.71. Along the way down, something notable happened to the stock's price tag: Shares finally look reasonably priced. The stock now costs about 20 times the earnings analysts expect from the company over the coming year. At last year's high, the same forward estimate would have priced the stock in the mid-30s.

The rapid-growth premium, in short, is gone. The interesting question is what the stock is worth by 2029 if the business simply keeps doing what its own guidance describes. The arithmetic is worth walking through.

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The business behind the de-rated price

Netflix's second-quarter results, reported in mid-July, show a company still growing at a double-digit pace -- just a slower one. Revenue rose 13% year over year to $12.6 billion, in line with the company's forecast. But the trajectory is what the market is watching: growth of 16.2% in the first quarter became 13.4% in the second, and management's third-quarter forecast implies about 12%. That's a clear deceleration.

For the full year, Netflix expects revenue of $51.0 billion to $51.4 billion, or 13% to 14% growth, along with an operating margin of 31.5%, up from 29.5% in 2025. That margin target implies operating income growth of more than 20% this year. Profits, in other words, are still compounding meaningfully faster than sales. Second-quarter operating income rose 11% year over year to $4.2 billion, and the company still expects about $12.5 billion of free cash flow for the year -- enough to support substantial share repurchases.

Two other pieces matter for the next three years. The first is advertising. Management projects the streaming service's ads revenue will roughly double in 2026 to approximately $3 billion. That's only about 6% of total revenue, but it's a fast-growing 6%, and it gives Netflix another growth lever beyond subscription price increases.

The second is share repurchases. Netflix bought back $4.7 billion of stock in the second quarter, its largest quarter ever, and it has $27.1 billion of authorization remaining.

The company's balance sheet drama has also cleared. Its agreement to buy Warner Bros. Discovery's streaming and studios businesses, including HBO Max, was terminated in February, and Netflix collected a $2.8 billion termination fee for its trouble.

The arithmetic to 2029

Now the forward math, piece by piece, with round numbers.

If revenue growth eases from about 13% this year to about 10% by 2029 (a continued glide, not a sharp break), revenue lands near $68 billion to $70 billion in 2029.

Margins should keep helping. Netflix has expanded its operating margin by about two percentage points a year recently. Assume that pace slows, and the margin settles around 35% by 2029. That puts operating income near $24 billion, up about 50% from this year's implied level.

Buybacks then do their part. Add a steadily shrinking share count, and earnings per share could plausibly reach about $5.00 to $5.50 in 2029, up from the roughly $3.50 analysts expect over the coming year.

The last variable is the multiple. Hold today's 20 times forward earnings, and those figures imply a stock price somewhere near $100 to $110 by 2029. Stretch the multiple range from 18 to 22 (pessimism on one end, a mild rerating on the other), and the band widens to about $90 to $120.

From $72.39, the midpoint of that range works out to an annualized return of about 13%. Not spectacular, but comfortably ahead of what most investors should expect from the broader market. And it requires no heroics, only Netflix hitting the trajectory its own guidance already sketches.

Of course, the arithmetic cuts the other way if the deceleration doesn't stop. If revenue growth slides through 10% and keeps going, the margin story eventually stalls with it, and a market already refusing to pay a premium could mark the multiple down further. That's the scenario the current price is bracing for.

My own read is that Netflix by 2029 is probably a $90-to-$120 stock, and the outcome inside that range comes down to growth stabilizing in the double digits. That's a fair price today, not an obviously cheap one. I'm not buying yet, but a quarter or two of steadier revenue growth would probably change my answer.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.