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Netflix (NASDAQ: NFLX) has been one of the best-performing large-cap growth stocks in 2025. One reason is that a lot of investors are looking at the US-listed streaming company as recession-resistant.
Is the stock a potential good after a 30% share price gain year to date? Let’s discuss.
Why Netflix looks economically resilient
First, let’s look at why investors are viewing this technology company as recession-resistant. There are two main reasons.
One is that the cost of a regular monthly Netflix subscription ($17.99 in the US and £12.99 in the UK) is very low relative to other forms of entertainment.
Think about it. How much does a dinner at a restaurant, a night out at a bar/pub, or a ticket to a concert cost these days? A lot more than £12.99 in most cases! Earlier this year, I bought a concert ticket and it was around 10 times the cost of a monthly Netflix subscription.
So while consumers may cut back on other activities if there’s a recession, there’s a decent chance they’ll hold onto their Netflix subscriptions. For £12.99, they can get a whole month’s worth of entertainment.
The other reason is that if Netflix’s customers decided that they didn’t want to pay the standard monthly fee, and dropped down to the ad-supported plan (which costs $7.99 a month in the US and £5.99 in the UK), the company may actually make more money. This is because it can generate substantial amounts of revenue by showing digital ads to customers.
Ultimately, the company has developed a savvy business model. As a result, it looks well placed for continued success in the current environment, unlike a lot of other businesses.
An expensive stock
The problem for investors however, is that after the strong share price gain in 2025, the growth stock now looks quite expensive.
Currently, analysts expect Netflix to generate earnings per share (EPS) of $25.50 this year and $30.90 next. That puts the stock on a forward-looking price-to-earnings (P/E) ratio of 45, falling to 37 using next year’s EPS estimate.
These ratios are high. And they may be off-putting to a lot of investors.
Looking at the earnings growth that’s forecast in the near term however, the multiples aren’t crazy. This year, analysts expect Netflix’s EPS to rise 29% on the back of 14% revenue growth.
So the price-to-earnings-to-growth (PEG) ratio’s only 1.55. That’s not particularly high.
When you consider that Netflix has a strong brand, a dominant position in streaming, a high return on capital (level of profitability), share buybacks, a strong balance sheet, and downturn-resistant qualities, the ratio could potentially be justified.
Of course, a P/E ratio in the 40s doesn’t really leave a margin of safety. If the company was to have a disappointing quarter for some reason (more competition from rivals, a lack of quality content, etc), and growth came in below forecasts, the stock could take a hit.
But I wouldn’t rule the stock out simply because of the high valuation. The company has proven a lot of doubters wrong in recent years (myself included) and I believe it’s worth considering as a long-term investment.
