Netflix's Business Strategy Focuses on Original Content, Despite Overpriced Stock

Netflix reported great results, but its stock is considered overpriced. The company's main strategy is to deliver original content to subscribers who pay for membership. Recently, Netflix introduced an ad-supported plan as part of its business strategy.

Netflix, Inc. reported robust financial results in the first half of 2025, with revenue growing by 1.1% compared to the same period last year. However, the company's stock price has been criticized as overvalued, raising concerns among investors and financial professionals [1].

The streaming giant's primary strategy remains focused on delivering original content to subscribers who pay for membership. This approach has been successful in driving growth, as evidenced by the company's expanding subscriber base and increased viewing hours. In the first half of 2025, Netflix delivered 95.1 billion hours of viewing to its members, a 1.1% increase compared to the same period in 2024 [2].

However, Netflix has faced challenges in maintaining member engagement. The company's share of viewing time in subscriber homes has remained relatively flat, despite increased membership. This lack of engagement growth is a concern, particularly as Netflix enters the ad-supported business. Growing the amount of time people spend watching increases ad revenue, which flows directly to the bottom line [2].

To boost engagement growth, Netflix has implemented two strategic shifts. The company is leaning into live and sports content, which drives engagement and conversation. Additionally, Netflix is partnering with local content providers to expand its entertainment offering. These moves aim to enhance the value delivered to members and attract new customers [2].

Despite these efforts, Netflix's stock price has been considered overvalued. Some analysts argue that the company's high valuation is due to its strong brand and content library, rather than its current financial performance. Others point to the company's aggressive content spending and the potential risks associated with the ad-supported tier.

In conclusion, while Netflix has reported strong financial results, its stock price appears to be overvalued. The company's focus on original content and strategic shifts to boost engagement are promising, but investors should consider the risks and uncertainties associated with the company's business model and market position.

References:
[1] https://finance.yahoo.com/quote/NFLX/
[2] https://nscreenmedia.com/how-netflix-fixes-its-stagnant-engagement-growth/
[3] https://economictimes.indiatimes.com/news/international/us/happy-gilmore-2-budget-revealed-adam-sandlers-275m-netflix-deal-powers-golf-comedy-sequel/articleshow/122918845.cms
[4] https://www.strategus.com/blog/netflix-programmatic-advertising?hsLang=en