Netflix's lofty valuation has even bullish investors nervous

NETFLIX investors face a dilemma: Continue to bet on a stock that has delivered best-in-class returns over the past year or reconsider shares that increasingly look like they're priced for perfection.

- GABBY JONES Bloomberg

The streaming giant's stock price has nearly doubled over the last 12 months amid growth from advertising sales, subscription price increases and limited exposure to tariffs. While that makes it one of the best performing S&P 500 members over that span, it's also boosted its valuation to 45 times expected earnings for the next year. In comparison, Nvidia Corp. is priced at 32 times while the Nasdaq 100 is at 27 times.

Such a premium valuation, Netflix's highest since 2021 - when its growth was being supercharged by the pandemic - is making even bullish investors wary of a potential sell off. Second-quarter earnings are due on July 17.

"I feel really good about its fundamentals, in terms of its pricing power, ad business and move into live events, but expectations have gotten to the point that any disappointment would be a risk," said Michael Smith, senior portfolio manager and head of growth equity at Allspring Global Investments.