Key Points
-
Money manager Ross Gerber thinks Netflix stock is cheap enough that it may attract attention from legendary value investor Warren Buffett.
-
Netflix has a durable competitive advantage in brand loyalty and original content, and it remains the top streaming service by most metrics.
-
Netflix trades at 23 times earnings, the cheapest valuation in three years, and most Wall Street analysts believe the stock is undervalued.
- 10 stocks we like better than Alphabet ›
Warren Buffett stepped down as Berkshire Hathway‘s CEO last December, but he is still involved in investment decisions for the company. For instance, Berkshire bought stock in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) last year and has continued to buy shares this year, and Buffett, not current CEO Greg Abel, initiated the investment.
Which company will draw Buffett’s attention next? One Wall Street expert says the answer might be Netflix (NASDAQ: NFLX), a megacap stock worth $305 billion. With shares down 41% from the high, the valuation is cheap enough that it may be on Buffett’s radar, according to Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Here’s what investors should know.
Image source: Getty Images.
How Alphabet fits Warren Buffett’s investment framework
Warren Buffett’s decision to buy Alphabet was somewhat surprising because, apart from buying Apple (NASDAQ: AAPL), Berkshire has largely avoided technology stocks during the past decade. That’s not because there’s some problem with that market sector, but rather because technology companies fall outside Buffett’s circle of competence.
Buffett clearly explained his reservations in his 1999 shareholder letter. “Our problem — which we can’t solve by studying up — is that we have no insights into which participants in the tech field have a truly durable competitive advantage.” Nevertheless, Buffett stepped outside his comfort zone when he purchased Apple stock in 2016 and he did so again with Alphabet stock in 2025.
What gave him the confidence to invest in those companies? Buffett says, while he may not understand the underlying technologies, he does understand consumer behavior. Apple and Alphabet inspire tremendous consumer loyalty, the former with smartphones and the latter with platforms like Google Search, YouTube, and Google Cloud.
Buffett once joked that consumers would sooner give up a second car than their iPhone. Similarly, many brands see Alphabet’s advertising tools and cloud services (especially those related to artificial intelligence) as indispensable. Even to someone like Buffett who is uncomfortable with technology stocks, such brand loyalty is an unmistakable sign of a competitive moat. And Buffett has historically focused on stocks that meet two criteria: They must (1) have a sustainable moat and (2) trade at a reasonable price.
How Netflix fits Warren Buffett’s investment framework
Buffett in 1996 wrote, “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now.” Netflix checks those boxes.
Like Apple and Alphabet, Netflix has a durable competitive advantage built on brand loyalty that should keep it at the forefront of its industry for years to come. While competition is far more intense today than it was five years ago, Netflix remains the dominant streaming service by almost every metric of consequence.
Specifically, Netflix has more monthly active users, generates more revenue, maintains a better retention rate, and accounts for a larger percentage of viewing time than any other subscription streaming service. The secret behind its dominant market position is quality original content. Netflix originals consistently outperform shows made by other streamers in terms of engagement.
So what? The streaming industry still has room to grow. I say that because all streaming services combined account for less than 50% of TV viewing time today, according to market research company Nielsen. Also, connected TV advertising accounts for less than 50% of total TV ad spending. So, Netflix has a durable competitive advantage in a growing industry, which suggests earnings will be materially higher in the future.
Most Wall Street analysts think Netflix stock is deeply undervalued
Netflix reported solid financial results in the second quarter. Revenue increased 13% to $12.5 billion, driven by particularly strong sales growth in international markets, and net income climbed 11% to $0.80 per diluted share. Management also provided solid guidance, saying revenue would increase between 13% and 14% for the full year.
Looking ahead, Wall Street estimates Netflix’s earnings will increase at 20% annually over the next three years. That makes the current valuation of 23 times earnings look cheap. In fact, Netflix hasn’t traded at such a low valuation in more than three years. And most Wall Street analysts think the stock is deeply undervalued. Netflix has a median target price of $93 per share, which implies 25% upside from its current share price of $74.
Here’s the big picture: Netflix stock is down 41% from its high, partly because investors are concerned about the company’s growth prospects after it failed to win the bidding war for Warner Bros. Discovery and Roku. But I think the stock is oversold at its current price, and I wouldn’t be surprised to see Berkshire Hathaway buy a position in the near future.
Should you buy stock in Alphabet right now?
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $399,832!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,374,595!*
Now, it’s worth noting Stock Advisor’s total average return is 968% — a market-crushing outperformance compared to 215% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of August 10, 2026.
Trevor Jennewine has positions in Roku. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, Netflix, Roku, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
