Netflix Stock Will Be Worth More by 2028: My Case for Buying NFLX Now

The past year or so has been a tough time for a Netflix (NASDAQ: NFLX) shareholder. The stock is down 43% from its all-time high reached in June of last year. Meanwhile, the S&P 500 is up 23% in the same period.

Fears of slowing growth, rising competition from short-form video and artificial intelligence (AI), and management's decision to report fewer metrics over the years have put pressure on the stock price. But I remain focused on the core operating strategy driving Netflix's financial results, and I see the stock's sell-off for what it truly is: an incredible buying opportunity.

At the current share price, I'm confident Netflix will be worth more by 2028. In fact, I expect it to produce returns that exceed the stock market average over the long run.

Image source: The Motley Fool.

The core business strategy at Netflix hasn't changed

Netflix has followed the same playbook for years. Its primary financial metrics are revenue and operating profit. With the vast majority of its revenue coming from subscriptions and viewer growth slowing relative to its massive 325 million subscriber base, management can predict, with a high degree of certainty, how much revenue it will generate for the year. It can then manage its biggest cost, content, to obtain a target operating margin.

Management aims to expand Netflix's operating margin every year. This year, it's aiming to achieve an operating margin of 31.5%, a 2-percentage-point expansion from last year and a 5-percentage-point improvement from two years ago.

The strategy has worked even as revenue growth slows. Management has kept content costs in check, up just 11.5% through the first half of 2026. It's focused on a mix of high-quality flagship entertainment, including live events and sports, and broad low-cost additions like video podcasts. Total viewing hours grew 2% year over year in the first half of 2026, faster than the same period in 2025.

More importantly, it's seeing success from providing more live programming, which drives new sign-ups well in excess of total time spent streaming them. That's enabled it to continue raising prices with minimal impact on subscriber churn. Live events also bolster its advertising business, which is on track to generate approximately $3 billion this year.

The ad business is proving highly valuable in driving overall growth. It allows management to raise the price of its ad-free subscription while still maintaining an accessible offer for a broad audience. There's still a lot of leverage in the advertising business, as ad-supported viewing scales further, the company develops new ad products, increases ad load, and improves its adtech stack. AI can also improve ad targeting, especially as it draws in a broader set of advertisers to the platform.

An absolute bargain right now

The collapse in Netflix's stock price hasn't been a result of deteriorating earnings. Revenue growth is slowing, but it's much harder to keep growing with over 325 million subscribers than with just 150 million. Of note, Netflix still has roughly twice as many subscribers as its next-closest competitors. And while that means slower revenue growth, it also means more efficient content spending, as it can amortize its costs across a much larger viewer base.

And Netflix has proven very efficient. As mentioned, operating margin is set to expand. Earnings per share continue to climb higher year after year. What's more, free cash flow conversion is very high, at around 90%. Management is using almost all of that excess cash to buy back stock. It repurchased a record $4.7 billion of its stock in the second quarter, and the board authorized an additional $25 billion in buybacks. It had $27.1 billion of capacity left in its remaining authorizations as of the end of June.

As a result of the steadily expanding operating margin and share repurchases, earnings per share have climbed even as the stock price has fallen over the past year. That's left the stock trading at a forward price-to-earnings (P/E) multiple of just 21. With double-digit revenue growth, operating margin expansion, and continued share repurchases, the company should be able to grow earnings per share at a 20% clip for the foreseeable future. However, the stock is currently priced as if it's going to grow much more slowly. That's why I'll continue to hold my shares, and I'm considering buying more at the current price.

Adam Levy has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.