Back in college, I spent hours watching Netflix series, sometimes telling myself to stop after just one more episode. Ultimately, I decided to stick with movies because I was spending so much time in front of the screen.
But even so, finding something worth seeing isn’t always easy. Sometimes I’ll spend more time scrolling through titles than actually watching anything.
I thought about this when Jim Cramer discussed Netflix during its “Mad Money” lightning round on October 29th.
He believes the stock “cannot move higher” and that the streaming giant has problems that investors shouldn’t ignore.
You used to be able to say, “Hey, have you seen that movie?” “Yeah, I’m going to get it on Netflix.” People don’t do that anymore… because they don’t even know if it’s on Netflix. Maybe it’s on Amazon. Maybe on HBO. Maybe on Apple. I mean, who knows? This is Netflix’s biggest problem.
Netflix’s “shared living room” is in tatters
Cramer’s argument is about behavior, not spreadsheets.
For years, Netflix has been the default answer to “Where can I watch this show?” It’s like a shared digital living room. If a show becomes the talk of the office, you already have the app.
The studio subsequently pulled back from the library and launched its own service. These days, hearing about a new movie doesn’t automatically make you turn on Netflix. You may need to check multiple streaming apps, consider another subscription, or even give up looking for it.
Also read: Netflix is losing to YouTube
Add to that price increases (the standard plan is now $19.99 per month, according to Netflix, and the premium plan is $26.99 per month), plus a crackdown on password sharing, and subscribers are starting to judge the value of each hour of viewing.
I covered Netflix in September when it was sitting at key support near $71, and the main point of contention was YouTube. Kramer’s view is adjacent to that view. The Digital i report I highlighted found that YouTube will surpass Netflix in average daily views globally by 2025.
All of this is reflected in stocks. Netflix (NFLX) shares are trading at $62, down 33.82% year to date and down 43.61% last year, according to Yahoo Finance. This is less than half of the all-time high of $134.12 set on June 30, 2025.
In a separate report from colleagues at TheStreet, Nielsen’s July metrics showed that YouTube accounted for 14.2% of total U.S. television time, an all-time high, while fourth-place Netflix accounted for 7.8%. Nielsen data cited in TheStreet’s report showed YouTube’s share has continued to climb since then.
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What Netflix admitted on its own earnings call
The company did not dispute engagement concerns. During the third-quarter conference call on Oct. 20, Chief Financial Officer Spence Neumann said: “To be clear, we want to grow watch time faster. We’re not satisfied. We’re working on it.”
Co-chief executive Greg Peters said the U.S. market needed to “go from very good to great” and admitted the advertising business was lagging behind targets as new advertising products were launched later than planned.
Netflix also made its largest layoffs since 2022. Peters said reaction to price changes is the ultimate test of value, depending on how long people watch.
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The financial situation is not weak. According to Netflix’s shareholder letter for the third quarter, revenue grew about 12% to $12.87 billion, and operating margins reached a record 34.6%, helped by cost timing that management expects to reverse in the fourth quarter.
Even after adding another $5 billion in content spending, free cash flow increased about 8%. The problem is the outlook.
Growth is expected to slow to about 11% in the fourth quarter, and management will not commit to achieving double-digit sales growth targets in 2027. After the report was released, the stock price fell more than 5% and continued to decline.
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Two views of Netflix
Last week I wrote an article about Bill Ackman’s return to Netflix. He called it a “high-growth utility” and said it would be difficult for anyone to cancel. He believes the stock trades at about 18 times earnings, one of the lowest valuations ever.
Kramer now works for the same company from the opposite direction. Ackerman saw people retaining services. Kramer sees services that are no longer the first thing people think of.
Both can be true at the same time, and I think that’s the real story. Customer churn is low. Management said conditions in the U.S. and international markets have improved better than expected. Customers who already have Netflix rarely leave.
The harder job is getting the next customer to choose Netflix over the other four apps, which is a growth issue, not a retention issue.
I notice this in my own viewing habits. I haven’t necessarily lost interest in Netflix, but I no longer think I’ll find something worth watching every time I open the app. Sometimes I spend a long time looking for a movie and end up watching nothing.
What could change Netflix’s image?
Bull markets have real catalysts. According to Netflix’s shareholder letter, the ad-supported tier will launch in 15 additional markets in 2027, starting in March 2027, covering nine European, Middle Eastern and African countries as well as Colombia, Peru and New Zealand.
This is how members will grow when the tier first launches elsewhere. India is already a bright spot: viewing time is up 24% year-on-year, and paid net additions are at a record high.
Further US price increases and better ad inventory filling are also possible, and with a P/E ratio of around 18x, the valuation doesn’t require much anymore.
The problem is that none of this addresses the issues Kramer raises. Cheaper advertising tiers lower the sign-up barrier. It doesn’t tell viewers where the movies their friends mentioned are hidden.
Netflix needs to be popular enough for people to say its name again, like they once said “Squidward.” Management said it is adjusting the team to achieve this goal.
Until then, Cramer’s message is that a stock needs a story that people repeat to each other, and right now, Netflix’s loudest story is that it can’t improve.
The next test is Q4 results on January 20, 2026, when Netflix must prove that watch time is growing and ad serving is back on track.
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