Netflix Inc. has been such a strong performer that not even the threat of massive tariffs on films has been enough for investors to question its prospects.
The streaming-video giant is a high-profile winner this year, with recent gains coming in the wake of an earnings report that featured record profits and a better-than-expected forecast, cementing its leading position in the entertainment industry. Investors have embraced the stock, which they see as offering strong growth trends, coupled with the perception that subscribers are unlikely to drop the service in the event of economic weakness, rendering it fairly recession resistant.
The company was also seen as insulated from the tariff war, although that got a gut check after President Donald Trump on Sunday said he plans to impose a 100% tariff on films produced overseas, calling them a national security threat. While such a policy would represent a direct risk to Netflix, investors largely brushed it off. The stock is down 1.3% this week, though it is coming off an 11-day rally that hit 20%, the longest in its history. It rose 0.5% on Wednesday.
“I don’t view this as a huge risk for Netflix, since it is such a dominant player it can lean on suppliers or raise prices to offset tariffs more than its smaller rivals can,” said Brian Frank, president and portfolio manager at Frank Funds. “More importantly, Netflix is so well managed and it gets tremendous returns from its content, so it has room to keep growing and the stock has room to keep rising.”
Among other streaming stocks, Walt Disney Co. is down 10% this year, though on Wednesday morning, the company reported better-than-expected results and raised its full-year outlook. Shares jumped 8.9%.
Roku Inc. has dropped 19% this year with the streaming-video platform company giving a weaker-than-expected outlook last week. Warner Bros. Discovery Inc. has slumped 19% and Paramount Global has climbed 10.5%. Both report later this week.
Netflix expects to spend $18 billion on content this year, and half of its budget is allocated to original and licensed content sourced outside North America, according to Bloomberg Intelligence, which cited the research firm Ampere.
Given that, tariffs represent a potential risk. “Under a worst-case scenario, we estimate this could reduce Netflix’s EPS ~20%,” wrote Citigroup analyst Jason Bazinet, who warned that the perception of Netflix as a safe haven from tariffs was under threat. However, he added that the company has “has a range of options at its disposal to limit the impact” of tariffs.
Estimating the potential impact is difficult, given the uncertainty surrounding how such a tariff might work; what titles it would apply to, including whether TV would also be subject; and how movies would be valued for tariff collection purposes. California Governor Gavin Newsom called for federal tax credits as a way to bring more film making to the US.
Estimates for Netflix’s net 2025 earnings have held steady over the past week, according to data compiled by Bloomberg, a sign analysts aren’t currently factoring tariff risk into their forecasts.
“Wall Street is starting to view Trump as the boy who cried wolf, since the administration has walked back so many things and said things they later went on to deny,” said Frank. “Headlines can cause chaos, but we have no idea what’s happening with the White House, and investors should wait to see if there’s an actual policy.”
This view was echoed across Wall Street.
Morgan Stanley analyst Benjamin Swinburne wrote that “with only a single social media post to go on,” it is “virtually impossible to size the impact to the industry or specific companies.” Kannan Venkateshwar at Barclays wrote that “there are literally no details available at this point other than a social media post from President Trump and therefore it is not clear how this will be implemented.”
Should the tariffs happen and hit Netflix earnings, the stock’s valuation could leave it vulnerable to a pullback. The stock trades at nearly 42 times estimated earnings. While this is well below the company’s long-term average of nearly 70 — a reflection of how the company has improved its profitability and cash flow over time — it represents a sizable jump from last month, when the multiple dropped as low as 32.5. Netflix also trades at a sizable premium to Disney’s multiple of 16.
“The idea of taxing a service is different than taxing a product, so at the moment I wouldn’t worry too much about a movie tariff, which seems like it was just thrown out there as an idea,” said Joe Saluzzi, co-head of equity trading at Themis Trading.
“However, there have been proposals that we thought were way out there at first, and they ended up being policy. I think if this becomes more concrete as a priority, there will be more volatility as investors assess the risks.”
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