Key Takeaways
- Pershing Square completely exited its Alphabet position during Q2 while initiating a fresh stake in Netflix.
- Netflix shares are currently at $78.25, representing a 42% decline from the June 2025 peak of $126.71.
- For the first time in its history as a publicly traded entity, Alphabet posted negative free cash flow and boosted its 2026 capex forecast to $200 billion.
- Analysts maintain a “Moderate Buy” stance on Netflix, with a mean price target of $96.65.
- After touching a 52-week bottom, Netflix rebounded 13% in August, with institutional ownership standing at approximately 81%.
During the second quarter, Bill Ackman’s Pershing Square executed a significant portfolio shift, completely liquidating its Alphabet holdings while establishing a new stake in Netflix. This strategic pivot offers insight into where the prominent hedge fund manager identifies compelling value opportunities in today’s market.
On Friday’s opening bell, Netflix started at $82.67 and currently trades at $78.25, representing a steep 42% discount from its June 2025 all-time high of $126.71. The stock’s 12-month floor stands at $65.08. Yet amid this downturn, Ackman apparently views the valuation as an attractive entry point.
Investor sentiment soured on Netflix following unsuccessful acquisition attempts for both Warner Bros. Discovery and Roku, sparking worries about potential growth limitations. However, the company’s core business metrics remain robust. Netflix maintains its dominant position across all major subscription streaming metrics, including monthly active users, total revenue, subscriber retention rates, and television viewing hours.
The company’s latest quarterly results showed earnings per share of $0.80, narrowly exceeding analyst projections by $0.01. Total revenue reached $12.56 billion, marking a 13.4% year-over-year increase. The streaming giant maintains a healthy net margin of 28.22% alongside a return on equity of 40.02%.
Wall Street analysts project annual earnings growth of 21% over the coming three-year period. Trading at a P/E ratio near 24.7, the valuation appears reasonable given these growth expectations. The average analyst price target of $96.65 suggests potential upside of roughly 24% from present levels.
NEOS Investment Management expanded its Netflix holdings by 10.2% during Q2, purchasing an additional 300,145 shares for a total stake worth approximately $230.6 million. Institutional investors collectively control around 80.93% of outstanding shares.
Wall Street Ratings and Price Objectives
Wolfe Research upgraded its price objective from $84 to $95 while maintaining an “outperform” designation. Morgan Stanley reaffirmed its “overweight” rating with a $90 target, and UBS sustained its “buy” recommendation at a $115 target. Conversely, China Renaissance lowered its target to $80 with a “hold” rating, and Seaport Research Partners downgraded the stock from “buy” to “neutral.”
The aggregate analyst consensus stands at “Moderate Buy,” with 4 Strong Buy ratings, 34 Buy recommendations, 16 Hold ratings, and 1 Sell rating.
The Reasons Behind Ackman’s Alphabet Exit
Alphabet delivered impressive Q2 results overall. Total revenue climbed 24% to $120 billion, while GAAP operating income soared 31% to $41 billion. Google Cloud revenue exploded 82% higher, marking its fifth straight quarter of accelerating growth.
However, one critical metric flashed warning signs. Alphabet recorded negative free cash flow for the first time since becoming a public company. Additionally, management elevated its full-year capital expenditure guidance to $200 billion, a massive jump from last year’s $91 billion. Such aggressive spending levels create uncertainty, and Ackman evidently chose not to stick around for the outcome.
Alphabet shares declined following the Q2 earnings release and remained approximately 2% below pre-announcement levels as of September 4.
Netflix delivered roughly 13% gains during August after bouncing from its 52-week low. The stock’s 50-day moving average currently sits at $75.43, while the 200-day moving average rests at $84.44.
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