Bill Ackman Says Long-Term Investors Can Benefit From a Broken Market. Here's the Price I'd Pay for Netflix Stock.

Bill Ackman, founder of Pershing Square Capital Management, has expressed his opinion that markets currently seem "broken" with stocks trading at prices he finds puzzling. However, he believes long-term investors can benefit when they purchase shares at prices that are significantly lower than their true value.

The stocks Ackman is particularly bullish on include Netflix (NFLX), where he holds a stake he reported in August. Notably, Netflix's shares are now near $66, approximately half of the $133.91 record close they achieved in June 2025 after a 10-for-1 stock split.

Although Netflix's third-quarter earnings per share rose 49% from a year ago to $0.87, and operating income increased 37% to around $4.5 billion, with an operating margin of 34.6%, these impressive figures were partly influenced by an expense linked to a dispute with Brazilian tax authorities. Excluding that expense, Netflix's operating income grew 15% year over year, and its operating margin improved by about 1 percentage point compared to the previous year.

Netflix's buybacks have also contributed to its valuation, with the company spending $4.8 billion to repurchase 63.9 million shares in the third quarter, which is its largest buyback period ever. This action has reduced its diluted share count by around 3% year over year.

However, Netflix's sales growth has been slowing, with revenue growth dropping from 17.6% in the fourth quarter of 2025 to 11.8% in the most recent quarter. Management's guidance for the fourth quarter remains around 11.5% growth. Additionally, the company has lowered its 2026 ad revenue forecast to around $2.7 billion from the previously anticipated $3 billion, citing slower-than-expected rollout of some ad features.

In the first quarter, Netflix earned $2.90 per share, which surpassed their own pre-quarter forecast of $0.76, and they are expecting another $0.67 per share in the fourth quarter. This translates to a total of approximately $3.57 per share for the year. Accounting for the $0.76 earnings forecast in the first quarter, their total earnings for 2026 would be around $3.10, representing a stand-in for the company's earnings without the Brazil-related fee.

On average, analysts expect Netflix to earn around $3.77 per share in 2027, which is about 22% higher than the current year's number without the fee. The stock currently costs about 18 times earnings on average for analysts' estimated 2027 earnings. While this may not be considered a bargain, Ackman suggests that paying about 16 times the 2027 earnings estimate, or around $60 a share, would be reasonable.

He believes that if Netflix's 2027 earnings fell 10% below the estimate, a $60 stock would still cost approximately 18 times earnings, which is the same price-to-earnings ratio investors currently pay for the full estimate.