Prediction: Netflix Will Become the Coca-Cola of Streaming

Coca-Cola (NYSE: KO) gets a lot of attention for its highly dependable track record. It's a stock Warren Buffett bought aggressively in the late 1980s and early 1990s. It is now Berkshire Hathaway's third-largest holding behind Apple and American Express.

Coke has increased its dividend for 64 consecutive years. You can count on one hand the number of stocks that are as recession-proof as Coca-Cola. But Coca-Cola was once one of the world's hottest growth companies.

What began as a soda fountain in Atlanta in 1886 blossomed into a nationwide sensation consumed in every U.S. state and territory by 1895. Bottling operations went global with the company's first expansion into Asia in 1912. During World War II, 64 temporary bottling plants were established worldwide to distribute over 5 billion bottles of Coca-Cola to American soldiers for just five cents a bottle.

Like Coca-Cola, Netflix (NASDAQ: NFLX) has been a trailblazer. Since its initial public offering in May 2002, Netflix has been viewed mostly as a paradigm-defining growth stock that revolutionized home entertainment with mail-order DVDs and is now a powerhouse streaming platform.

Today, Netflix is heavily out of favor, with the stock down about 53% from its all-time high and producing a negative 7% return during the past five years, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) is up 63% (as of Oct. 30).

Here's why I predict Netflix will become the Coca-Cola of the streaming service industry, and why it's an excellent buy now.

Image source: Netflix.

Netflix's hypergrowth days are over

Earnings drive stock prices over the long term. But narratives and emotions can sometimes get disconnected from fundamentals. And that's certainly the case with Netflix.

The company is generating all-time high revenue and earnings. Operating margins have increased, and the company is buying back its stock aggressively, which accelerates earnings growth. So some investors may be wondering why Netflix has sold off so heavily.

Netflix needs to spend a boatload on content in order to keep subscribers engaged against a growing list of alternatives -- from legacy media to streaming platforms, Alphabet-owned YouTube, Meta Platforms-owned Instagram, TikTok, and more. Traditionally, Netflix has avoided blockbuster acquisitions, preferring instead to manage its own pipeline of licensing, producing, and distributing content.

On Dec. 5, 2025, Netflix announced to buy Warner Bros. Discovery, which would have added a lot of debt to its balance sheet while boosting its content library. And the only reason the deal fell through is that Skydance outbid Netflix -- allowing Netflix to pocket a $2.8 billion termination fee in the process.

Despite losing the bid for Warner Bros. Discovery, Netflix still moved forward with its third price increase in less than three years. And starting in 2025, Netflix stopped reporting subscriber numbers, choosing instead to focus on maximizing revenue, earnings, free cash flow, and most importantly --- engagement. These decisions sent a clear signal that Netflix's rapid growth days are in the rearview mirror, as its existing subscriber base may even be more valuable than the subscribers it could one day acquire.

The focus on profitability is boosting Netflix's near-term earnings growth, but there are concerns that its pricing pressure could erode if it doesn't continue to add features to the platform -- like high-budget shows and movies, and even sports. Especially with the $26.99-per-month price tag of the U.S. Netflix premium plan, which is among the most expensive stand-alone streaming tiers in the industry.

Coca-Cola learned the hard way that it doesn't compete with Starbucks

Some investors may view entertainment shifting toward short-form content, ideally suited for mobile, rather than scheduled living room TV time, as an existential threat to the streaming industry. But the notion that Netflix is competing with TikTok and Instagram reminds me of narratives swirling around Coca-Cola in the 1990s and 2000s, when Starbucks (NASDAQ: SBUX) was rapidly expanding.

At the time, there were concerns that Starbucks was taking market share from soda makers like Coca-Cola because they were both competing for a share of daily consumer caffeine and drink consumption. Which is similar to saying Netflix is competing with all forms of media -- like written articles, short-form video, gaming, sports, podcasts, music, etc., when in reality a better way to think about Netflix is how it competes with other companies that produce, license, and distribute movies and shows.

In hindsight, the concerns were overblown. Coca-Cola sought to carve out a foothold in the coffee industry by introducing the ill-fated Coca-Cola BlaK in 2006 (discontinued in 2008) and later acquiring Costa Coffee in 2019, which it arguably overpaid for. In reality, it would have been better off not mistaking the rapidly growing coffee industry for a threat to its core business.

Netflix needs to embrace its new identity

Coca-Cola continues to reward patient investors by pairing its top brands in the non-alcoholic beverage category with a highly efficient supply chain and marketing. It doesn't try to compete in food and beverage categories outside its wheelhouse and continues to steadily increase its sales and earnings despite shifts in consumer preferences.

I think Netflix could become the Coca-Cola of the entertainment industry. Is it arguably the best operator among streaming companies -- with high margins and an impeccable balance sheet with very low debt (while so many legacy media companies have high debt). It doesn't need to invest too heavily in winning mobile market share, short-form video, or overpay for sports licensing. It just needs to continue producing high-quality shows and movies that captivate audiences and keep subscribers engaged.

If Netflix can take a page out of Coca-Cola's book by embracing what it does best in being the leading streaming platform rather than getting overly concerned with broader trends in media and entertainment, then I could see the stock producing excellent returns for patient long-term investors.

American Express is an advertising partner of Motley Fool Money. Daniel Foelber has positions in American Express, Netflix, and Starbucks. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, Meta Platforms, Netflix, and Starbucks. The Motley Fool has a disclosure policy.