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This streaming video leader appears to have further growth potential.
Shares of Netflix (NFLX 0.40%) recently surged to unprecedented levels following the release of its first-quarter earnings report, which surpassed the expectations of analysts. For the quarter ending March 31, the company reported a 13% increase in revenue compared to the same period last year. Additionally, its earnings per share (EPS) reached a remarkable $6.61, marking a 25% rise from the previous year’s quarter.
As the stock price has risen 71% over the past year, some investors might think it’s too late to invest in Netflix. However, this perspective risks missing essential aspects of the company’s growth trajectory, which is supported by several strong underlying factors.
Here’s why there may still be an opportunity to purchase Netflix shares.
Key Factors Supporting Continued Growth for Netflix
Netflix appears to be operating at full capacity.
Management reports an ongoing increase in new subscriptions, with incremental price hikes across various regions enhancing both margins and profits. The company is also optimistic about its extensive lineup of exclusive series and films, which continue to captivate audiences. Notably, Netflix’s venture into live events, including boxing and weekly WWE wrestling, has received positive feedback from viewers.
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A significant recent achievement has been the growth of its advertising-supported tier, attracting a diverse range of subscribers while creating additional revenue avenues.
Gregory Peters, co-CEO of Netflix, emphasized that the company is “just beginning” to tap into its proprietary advertising technology within the estimated $600 billion global advertising landscape. Although this sector is still a smaller component of its overall business compared to subscriptions, it has become a vital driver of growth.
Potential for Continued Stock Price Increases
Looking ahead to 2025, Netflix aims to achieve revenues between $43.5 billion and $44.5 billion, indicating a robust 13% growth at the midpoint of its forecast compared to 2024. The expected operating margin of 29% would set a new company record, significantly higher than the 26.7% reported last year. This improvement highlights a crucial trend: Netflix is now more profitable than ever, which could fuel the next phase of the stock’s upward momentum. Investors may find Netflix stock to be a promising addition for a diversified investment portfolio.
Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
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