Netflix: a 21% P/E discount to peers for the highest operating margin in the set

Netflix trades at 17.8x consensus forward earnings, 21% below the 22.6x peer median, despite a 34.6% operating margin against 13.7% for peers. The peer-median multiple on our FY27E EPS of $3.87 gives $87.5. We initiate at Buy with an $88 target, 31% above the $67.05 price.

• The FY27E EPS slowdown is an artefact of the $2.8bn WBD fee: adjusted EPS grows 16% in FY26E and 26% in FY27E, against consensus growth of 5.1%4 (source: yfinance consensus estimates and earnings history, 22 October 2026).
• Advertising is the second engine: we estimate $5.7bn of ad revenue by FY28E, worth $8.54 a share, about 10% of the target1 (source: Netflix Q3 26 earnings call, 20 October 2026).
• Engagement is holding: Q3 26 revenue grew 11.8% and churn improved globally and in the US1 (source: Netflix Q3 26 earnings call, 20 October 2026).