The Nasdaq Composite has been on a non-stop thrill ride for more than two years and shows no signs of slowing. A number of factors have contributed to the rally, including waning inflation, falling interest rates, higher corporate earnings, and the advent of artificial intelligence (AI). After rising 43% in 2023, the tech-focused index added another 29% in 2024. Those back-to-back gains bode well for the coming year, as history suggests the bull market will continue.
Going as far back as far as 1972 -- the first full year the Nasdaq traded -- in each year after achieving gains of 28% or more, the tech-centric index has delivered additional gains of 19%, on average. This seems to suggest there's additional upside ahead. That's not all. Bull markets tend to last 1,866 days, on average, or more than five years. The current bull market just passed its two-year anniversary in October, so history suggests the rally has room to run.
Netflix(NASDAQ: NFLX) might not be the first stock that comes to mind when you think about unstoppable stocks -- but consider this: The streaming pioneer surged 1,740% over the past decade. The company's performance isn't relegated to some dusty past either. It jumped 83% last year, nearly three times the gains of the Nasdaq, and it's already outpacing the tech-centric index thus far in 2025. Recent evidence suggests there could be more to come.
Image source: Getty Images.
Bullish results
Netflix just reported its fourth-quarter results and cleared expectations on every metric that matters. Revenue of $10.2 billion climbed 16% year over year and generated robust profitability as earnings per share (EPS) of $4.27 soared 102%. Sales growth was fueled by strong paid subscriber additions of more than 18.9 million, surging 44%, marking the streamer's biggest quarterly increase in subscribers ever. The bottom line was driven higher by expanding operating margins that increased by 530 basis points to 22.2%.
For context, analysts' consensus estimates were calling for revenue of $10.1 billion and EPS of $4.20, along with subscriber additions of 9.18 million, so Netflix beat expectations across the board.
As importantly, management is forecasting its growth streak will continue. Netflix is guiding for first-quarter revenue of $10.4 billion, up more than 11%, while EPS of $4.23 would increase nearly 6% -- despite tough foreign currency headwinds resulting from a strong dollar.
Furthermore, management provided a robust full-year 2025 revenue forecast of $44 billion at the midpoint of its guidance, or growth of about 13%. Netflix also increased its operating margin outlook to 29% for 2025, up from 27% in 2024. This illustrates the company's ability to ratchet up profitability even as it generates robust growth.
Incremental growth is progressing
Management called out several factors that contributed to Netflix's out-sized growth in Q4:
Squid Games 2 is on track to become one of the company's most-watched original series seasons.
Carry-On quickly joined Netflix's all-time Top 10 films list.
The Jake Paul vs. Mike Tyson fight became the "most-streamed sporting event ever."
On Christmas Day, the company delivered "the two most-streamed NFL games in history."
Management also cited a trifecta of opportunities that it believes will fuel future growth.
Netflix has been experimenting with video games for some time but scored a significant win in Q4. Squid Game: Unleashed -- based on its hit series -- became the No. 1 free game in the Apple App Store in 107 countries and is on track to be Netflix's "most downloaded game" ever. The company plans to capitalize on that success by working to deliver a few "best-in-class titles" based on its intellectual property, as well as party games, children's games, and licensed titles like Grand Theft Auto.
In the wake of the massive success of its live events, Netflix plans to expand its live streaming. The company is augmenting its 52 weekly episodes of WWE Monday Night Raw -- the highly rated wrestling entertainment program -- with the Screen Actors Guild (SAG) Awards, a new variety talk show starring John Mulaney, and Christmas Day NFL games in 2025. Netflix also announced it had secured U.S. rights to FIFA Women's World Cup Soccer in 2027 and 2031.
Lest there be any doubt, the biggest potential opportunity is the ongoing growth in its advertising business. Members signing up for the advertising tier increased 30% quarter over quarter and accounted for 55% of new subscribers in the countries where it shows advertising. As the company expands its audience, it becomes increasingly valuable to advertisers.
After a hiatus of three years, Netflix announced it is increasing subscription prices across the board, including on its lowest-priced ad-supported plan. The price hikes will take place in the U.S., Canada, Portugal, and Argentina. Management cites its strong slate of upcoming programming and robust engagement levels as supporting the move.
Finally, investors will note that Netflix currently trades for roughly 36 times expected 2025 earnings, which might appear expensive at first glance. However, as this quarter makes clear, Wall Street continues to underestimate the streaming giant. Given its strong track record of growth, I'd argue that's a fair price for a company that consistently defies expectations. That's why 2025 could be another banner year for Netflix shareholders.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $357,084!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,554!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $462,766!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Danny Vena has positions in Apple and Netflix. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.
