Bill Ackman Dumps Alphabet (GOOGL) for Netflix (NFLX): Here's Why

Key Takeaways

Table of Contents

Pershing Square Capital completely liquidated its Alphabet position during Q2 while simultaneously establishing a fresh stake in Netflix.
Netflix shares currently trade 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 announced plans to boost 2026 capital expenditures to $200 billion.
Analysts maintain a “Moderate Buy” rating on Netflix with a mean price objective of $96.65.
Following a 52-week low in August, Netflix rallied 13%, with institutional ownership representing approximately 81% of outstanding shares.

During the second quarter, Bill Ackman’s Pershing Square executed a significant portfolio realignment, completely exiting its Alphabet holdings while simultaneously initiating a position in Netflix. This strategic shift provides insight into where the prominent hedge fund manager believes opportunity currently exists.

Netflix, Inc., NFLX

Shares of Netflix started Friday’s session at $82.67 and are now changing hands at $78.25, marking a substantial 42% retreat from the June 2025 all-time high of $126.71. The stock touched a 12-month floor at $65.08. Notwithstanding this significant drawdown, Ackman apparently views current valuations as compelling.

The streaming giant faced selling pressure following unsuccessful acquisition attempts for both Warner Bros. Discovery and Roku, sparking investor doubts about future expansion potential. However, the underlying business metrics remain robust. Netflix maintains its dominant position across all subscription streaming platforms in key metrics including monthly active users, total revenue, subscriber retention rates, and television viewing duration.

During its latest quarterly report, Netflix delivered earnings per share of $0.80, exceeding analyst projections by a penny. Revenues reached $12.56 billion, reflecting 13.4% annual growth. The company maintains a net profit margin of 28.22% alongside a return on equity of 40.02%.

Wall Street analysts project earnings growth of 21% per year through the next three-year period. With a price-to-earnings ratio hovering around 24.7, the valuation appears attractive relative to anticipated expansion. The consensus analyst target of $96.65 suggests approximately 24% potential appreciation from present levels.

NEOS Investment Management expanded its Netflix stake by 10.2% during Q2, purchasing an additional 300,145 shares for a combined position worth approximately $230.6 million. Institutional shareholders collectively control roughly 80.93% of outstanding shares.

Wall Street Price Targets and Ratings

Wolfe Research upgraded its price objective from $84 to $95 while maintaining an “outperform” designation. Morgan Stanley reaffirmed its “overweight” stance with a $90 target, and UBS continues rating the stock “buy” with a $115 price objective. Conversely, China Renaissance reduced its target to $80 alongside a “hold” rating, while Seaport Research Partners moved from “buy” to “neutral.”

The aggregate analyst consensus stands at “Moderate Buy” comprising 4 Strong Buy ratings, 34 Buy recommendations, 16 Hold ratings, and 1 Sell opinion.

The Catalyst Behind Ackman’s Alphabet Exit

Alphabet delivered impressive Q2 results on the surface. Total revenue climbed 24% to reach $120 billion, while GAAP operating income expanded 31% to $41 billion. Google Cloud revenue soared 82%, marking the fifth straight quarter of accelerating growth.

However, a significant warning signal emerged in the cash flow statement. Alphabet generated negative free cash flow for the first time since becoming a public company. Additionally, management elevated full-year capital expenditure guidance to $200 billion, a dramatic increase from last year’s $91 billion. Such aggressive spending naturally prompts concerns, and Ackman evidently chose not to remain invested while those questions get resolved.

Alphabet shares declined following the Q2 earnings release and remained approximately 2% below pre-announcement levels as of September 4.

Netflix shares appreciated roughly 13% throughout August after reaching their 52-week low point. The stock’s 50-day moving average currently sits at $75.43, while the 200-day moving average stands at $84.44.

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