With a YTD gain of over 28%, Netflix (NFLX) is outperforming the S&P 500 Index ($SPX) by a wide margin. The company’s business stood out amid the tariff chaos and recession fears, and many investors saw it as a bastion of stability amid the macroeconomic turmoil.

Meanwhile, market sentiment has flipped over the last week as tariff uncertainty has subsided. There has been a broad-based rally in beaten-down names, which helped the S&P 500 Index turn positive for the year. Netflix hasn’t participated in the recent rally and has been almost flat over the last five days. In this article, we’ll examine whether Netflix can continue outperforming in 2025 or whether investors would be better off shifting to a more aggressive play amid the risk-on environment.

Netflix Reported Stellar Numbers in Q1

Netflix reported a strong set of numbers in Q1 2025 and beat on both the top line as well as the bottom line. It marked the first quarter when the company did not disclose its streaming numbers. The pivot was planned, and going forward, the company will provide occasional updates on subscriber numbers.

While the mention of the word “tariff” surpassed that of “artificial intelligence,” during the recent earnings calls, Netflix was among the rare companies that signaled that it is business as usual for the company. The company’s co-CEO, Greg Peters, said during the Q1 earnings call, “Based on what we are seeing by actually operating the business right now, there’s nothing really significant to note.”

Peters went on to add, “entertainment historically has been pretty resilient in tougher economic times. Netflix, specifically, also, has been generally quite resilient.” It was perhaps the most reassuring commentary that I heard on any earnings call during the March earnings season. 

NFLX Stock Forecast

Muted analyst action has been one common theme this earnings season. As for Netflix, there were no major target price cuts before Q1 earnings were released, while there were some cursory upwards adjustments following the confessional. Netflix’s mean target price stands at $1,088.27, which is below the current price. Its Street-high target price (via Rosenblatt Securities) is $1,514, which is around 33% higher than the May 13 closing price.

Netflix Trades at Premium Valuations

Netflix trades at a forward price-to-earnings (P/E) multiple of roughly 45x. To put that in context, the multiple is higher than all the “Magnificent 7” stocks except for Tesla (TSLA). In the entertainment space, Disney (DIS) trades at a forward P/E multiple of 19.1x. To sum it up, Netflix trades at a significant premium to the average tech company as well as its peers in the entertainment industry.

I would argue that Netflix has earned the right to command premium valuations due to its strong execution. At a time when the streaming industry was trying to balance growth with profitability (or rather losses for most companies), Netflix delivered both subscriber growth as well as profits.

The company added over 41 million subscribers last year, which pushed its total subscriber count beyond 300 million. At the same time, its operating income rose 50% over the last year. Netflix has also shown pricing power and raised prices in the U.S. earlier this year across all its tiers.

Should You Buy Netflix Stock?

I remain bullish on Netflix’s growth story in the long term and expect ad revenues, sports streaming, and video gaming to drive the company’s long-term performance. The three have a massive total addressable market, and Netflix has just scratched the surface so far. 

Netflix has built a strong moat with its impressive and ever-expanding library of global content, and while other streaming peers are trying to play catch-up, none have been able to match its compelling product proposition. 

However, I am not sold on Netflix’s short-term outlook given the lack of triggers that can drive the stock higher. Given the premium valuations and the expected fund flow from defensive to high-beta names in the near term, I find it hard to build a compelling “buy” case for Netflix for the short term. 

That said, Netflix is now part of my core portfolio, and I will continue holding my existing shares while waiting for a better entry point to add more.