NFLX Stock Buy Case: Operating Margin Expansion Drives Long-Term Value

The past year and a half has been challenging for Netflix (NFLX) shareholders, with the stock down 43% from its all-time high in June of the prior year, contrasting with the S&P 500's 23% gain over the same period. Concerns regarding slowing growth, escalating competition, and a reduction in reported metrics have weighed on the stock. However, a closer examination of Netflix's core financial strategy suggests significant long-term value potential.

The company is actively pursuing an operating margin target of 31.5%, marking a 2-percentage-point increase from its previous performance. This expansion is underpinned by restrained content cost growth, which has risen only 11.5% through the first half of 2026, while total viewing hours saw a 2% year-over-year increase in the first half of 2026. Furthermore, Netflix is demonstrating a robust free cash flow conversion rate of approximately 90%, indicating efficient capital utilization. Management projects the ability to grow earnings per share at a 20% annual rate for the foreseeable future.

$NFLX+WL key levels (educational): R2 $77.57 · R1 $77.40 · last $77.40 · S1 $76.15 · S2 $65.08.

While the broader market, represented by the S&P 500 Index (^GSPC), has seen a gain of 0.86%, Netflix's current valuation is viewed by some analysts as an attractive entry point for long-term investors anticipating future earnings growth and margin improvement.