Value
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.9 |
| P/S | 5.4 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 6.0 |
| PEG | 5.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 21.7x
- ▸PEG: 1.49
NFLX · Why this verdict
Why Netflix (NFLX) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.4/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Netflix is a wide-moat entertainment platform with 48% return on equity, 29% operating margins, and 194% free cash flow conversion, experiencing a technical death cross that has pushed the stock to RSI 25 — creating a high-asymmetry entry opportunity for investors willing to tolerate near-term price weakness.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Netflix generates 48% return on equity, 29% operating margins, and converts 194% of net income to free cash flow, reflecting a compounder-quality business with a wide economic moat that institutional peers rate among the best in the entertainment industry. Quality breakdown | Return on equity stays above 40% and operating margin remains above 25% over the next 12 months as subscriber monetization improves. | →Stable |
| CounterHigh cash conversion relative to net income can partially reflect non-cash charges; the sustainability of 48% ROE depends on continued pricing power that may face competition from other streaming platforms. | ||
The stock is in a confirmed death cross with RSI at 25 — a near-capitulation level — while on-balance volume is actually rising, suggesting institutional accumulation even as the price has declined 30%+ from recent highs. Momentum breakdown | Price recovers above the 200-day moving average within 6 months as the RSI mean-reverts above 45 from the current 25 level. | Tripped↓Deteriorating |
| CounterDeath crosses with RSI at 25 can persist for extended periods in high-multiple stocks, and a 5% moving average slope decline of -5%/30 days suggests strong downward momentum that may take quarters to reverse. | ||
The risk/reward setup shows 29% upside to the analyst target against only 5% downside risk from the current entry level, yielding an asymmetry ratio of 5.7 — one of the most favorable setups in the current screening universe. Targets | Price rises above $100 within 12 months as earnings trajectory recovers and technical downtrend resolves. | Tripped→Stable |
| CounterAnalyst consensus upside of 40% in a death-cross setup may reflect anchoring to prior price levels rather than a reassessment of fundamental value, and targets could be revised lower after another earnings miss. | ||
Netflix has missed earnings estimates in 2 of the last 4 quarters with an average negative surprise, and the put/call ratio stands at 4.78 — reflecting strong options market positioning for further downside. Key risks | Netflix beats consensus EPS in the next 2 quarters, resetting the negative surprise narrative and reducing put/call ratio below 2.0. | →Stable |
| CounterEarnings misses in a high-quality compounder often represent an opportunity to add shares at a discount, particularly when the underlying business metrics remain strong. | ||
Netflix generates 48% return on equity, 29% operating margins, and converts 194% of net income to free cash flow, reflecting a compounder-quality business with a wide economic moat that institutional peers rate among the best in the entertainment industry.
→StableQuality breakdown
- Expectation
- Return on equity stays above 40% and operating margin remains above 25% over the next 12 months as subscriber monetization improves.
CounterHigh cash conversion relative to net income can partially reflect non-cash charges; the sustainability of 48% ROE depends on continued pricing power that may face competition from other streaming platforms.
The stock is in a confirmed death cross with RSI at 25 — a near-capitulation level — while on-balance volume is actually rising, suggesting institutional accumulation even as the price has declined 30%+ from recent highs.
Tripped↓DeterioratingMomentum breakdown
- Expectation
- Price recovers above the 200-day moving average within 6 months as the RSI mean-reverts above 45 from the current 25 level.
CounterDeath crosses with RSI at 25 can persist for extended periods in high-multiple stocks, and a 5% moving average slope decline of -5%/30 days suggests strong downward momentum that may take quarters to reverse.
The risk/reward setup shows 29% upside to the analyst target against only 5% downside risk from the current entry level, yielding an asymmetry ratio of 5.7 — one of the most favorable setups in the current screening universe.
Tripped→StableTargets
- Expectation
- Price rises above $100 within 12 months as earnings trajectory recovers and technical downtrend resolves.
CounterAnalyst consensus upside of 40% in a death-cross setup may reflect anchoring to prior price levels rather than a reassessment of fundamental value, and targets could be revised lower after another earnings miss.
Netflix has missed earnings estimates in 2 of the last 4 quarters with an average negative surprise, and the put/call ratio stands at 4.78 — reflecting strong options market positioning for further downside.
→StableKey risks
- Expectation
- Netflix beats consensus EPS in the next 2 quarters, resetting the negative surprise narrative and reducing put/call ratio below 2.0.
CounterEarnings misses in a high-quality compounder often represent an opportunity to add shares at a discount, particularly when the underlying business metrics remain strong.
Per-dimension breakdown
Quality
8.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 10.0 |
| Gross margin | 5.8 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.4 |
| FCF quality | 10.0 |
| Moat | 7.5 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 50%
- ▸Strong margins: 28%
- ▸Excellent cash conversion: 186% FCF/NI
- ▸Wide economic moat
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.8 |
| EPS growth | 4.2 |
Momentum
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.7 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 2.5 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -6.2%/30d — confirmed downtrend
Sentiment
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.5 |
| Price target | 6.9 |
| erm sentiment | 4.8 |
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 3.8 |
| notable moves | 3.0 |
- ▸Negligible insider selling — $15,812,012 (0.005% of mkt cap)
Peer rank
6.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.3 |
| quality rank | 9.5 |
| growth rank | 6.2 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
1.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.8 |
| support resistance | 0.9 |
| 52w position | 3.0 |
Risk (lower is worse)
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.9 |
| days to cover | 8.8 |
| volatility | 5.8 |
| put call | 0.0 |
| implied vol | 6.3 |
| beta | 5.0 |
| debt equity | 7.7 |
- ▸Elevated put/call: 6.72
Catalyst
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
- ▸Earnings concerns: 2B/2M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:4.6>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:47d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:0.4<1.5@spot
- DEATH_CROSS:HARD_BLOCK
Warning (2)
- MOMENTUM:4.6<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.36
Upside
+4.2%
Downside
11.6%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 63
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — Beta 1.51>1.3
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 8.4) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.4<1.5@spot, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 0.36 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 8.4, Sentiment at 6.6, and Peer rank at 6.5; the weakest are Technical at 1.9, Catalyst at 3.3, and Insider at 3.9. The V9 engine flagged 2 failed gates with 2 warnings, producing an asymmetric reward-to-risk of 0.36 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Profitability Moat
Trip ifOperating margin compresses below 22% or return on equity falls below 30% for 2 consecutive quarters.
- P2Death Cross Low Rsi EntryTripped
Trip ifPrice drops below $76.90 stop-loss level or RSI falls below 20 and remains below 20 for more than 10 trading days.
- P3High Asymmetry RatioTripped
Trip ifAnalyst consensus price target declines below $90 or the asymmetry ratio falls below 2.0.
- P4Earnings Miss Near Term Risk
Trip ifEPS surprise falls below -10% in at least 2 of the next 3 quarters.