Bill Ackman's Pershing Square Capital Management has disclosed an increased stake in Netflix, marking a return to the streaming stock four years after the fund exited its previous position at a loss. The move comes with Netflix shares down more than 30 percent over the past 12 months, pushing valuation multiples to levels the hedge fund apparently finds attractive.
The valuation argument
Netflix trades at 24 times forward and trailing earnings and less than seven times sales, metrics the source frames as appealing against a backdrop of improving profitability. The stock's decline from its highs has compressed the multiple while the business has kept growing, second-quarter revenue rose 13 percent year over year, with Latin America up 21 percent and Asia-Pacific up 16 percent.
The diversification play
The thesis rests on Netflix expanding beyond film and television into podcasts, live events and gaming, alongside a push for localized content to drive international subscriber growth. Whether those bets translate into durable pricing power or merely higher content spend remains the open question.
The competitive reality
The source acknowledges a highly competitive market where new entrants can steal attention quickly, but argues Netflix's scale and capital position it to win. That is a claim, not a fact. The fund's own history with the name, a prior exit at a "hefty loss" in 2022, suggests the trade has not always worked.
What to watch
Investors should monitor whether the international growth rates hold, whether the new verticals generate incremental revenue or just engagement metrics, and whether Pershing Square discloses the size of the position or any break conditions. The filing does not reveal the stake's dollar value or whether it was built with cash or derivatives.