Key Points
While Netflix has been one of the best investments in recent history, Berkshire never bought its shares.
Buffett has to appreciate Netflix’s financial discipline in deciding to pass on the Warner Bros Discovery deal.
However, valuation counts too, so the streaming stock likely looks too expensive for the Oracle of Omaha.
- 10 stocks we like better than Netflix ›
Warren Buffett, who is no longer the CEO of Berkshire Hathaway, built an incredible track record by focusing on what he believes are high-quality companies. There’s no doubt that Netflix (NASDAQ: NFLX), with its incredible growth, innovation, and sizable profits, falls into this category of elite businesses.
Although he never purchased shares, it’s still informative to put Netflix though the Oracle of Omaha’s tests. Here’s one reason he would like the streaming stock, and one reason he’d avoid it like the plague.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Image source: Netflix.
The streaming leader’s management exercised financial discipline
When Netflix agreed to purchase the studios and streaming assets of Warner Bros Discovery in December, I was surprised. The $83 billion initial terms (based on enterprise value) would’ve resulted in Netflix taking on a sizable chunk of debt. And it would’ve been the first sign of the business parting ways with its track record of organic growth.
On Feb. 26, Netflix bowed out of the acquisition race, avoiding a bidding war with Paramount Skydance. “This transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price,” the press release read.
Assessing the management team is an important part of Warren Buffett’s investing process. And this partly involves looking at a company’s capital allocation prowess. The fact that Netflix walked away from a blockbuster deal, one that would’ve placed it light years ahead of the rest of the industry, is a clear display of financial discipline. When the numbers don’t make sense, it’s time to move on.
I don’t doubt that Buffett applauded this decision.
Being a value investor typically means staying away from high-flying names
Maybe Warren Buffett’s biggest legacy will be that he popularized the concept of value investing. Buying stocks for less than their estimated intrinsic worth has obviously worked out well for Berkshire Hathaway, as it has resulted in it being one of the few trillion-dollar companies out there. This philosophy naturally leads to the avoidance of high-flying names.
In the past 20 years, Netflix shares have posted an astronomical gain of 23,230% (as of April 17). While the business has established a dominant position in the streaming industry, the stock trades at a price-to-earnings (P/E) ratio of 38.5. That expensive valuation is why the Oracle of Omaha would avoid Netflix like the plague. He probably doesn’t think there’s a margin of safety.
Buffett’s best investment in recent memory is Apple, which the conglomerate first bought around a P/E multiple of 10.6 in the first quarter of 2016. By comparison, Netflix is simply out of reach for the legendary investor.
Should you buy stock in Netflix right now?
Before you buy stock in Netflix, 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 Netflix 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 $511,411!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,238,736!*
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 199% 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 April 21, 2026.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Netflix, and Warner Bros. Discovery and is short shares of Apple. The Motley Fool has a disclosure policy.
