In This Article:
Shares of Netflix (NASDAQ: NFLX) charged sharply higher on Wednesday, surging as much as 14.9%. As of 10:58 a.m. ET, the stock was still up 11.1%.
The catalyst that propelled the streaming pioneer higher was the company's financial results, which were much better than investors had anticipated.
Subscriber growth is soaring
For the fourth quarter, Netflix reported revenue that grew 16% to $10.2 billion. The company also expanded its operating margin, which increased by 530 basis points to 22.2%. This resulted in diluted earnings per share (EPS) that soared 102% to of $4.27. It also marked the first time Netflix generated $10 billion in operating income in a single quarter.
To give those numbers context, analysts' consensus estimates were calling for revenue of $10.11 billion and EPS of $4.20, so Netflix cleared both hurdles with ease.
Netflix will stop reporting its subscriber numbers in 2025, but Netflix dazzled investors during the final quarter of 2024, adding nearly 19 million new paid users, "the biggest quarter of net adds in our history," according to the company. Wall Street had expected it to add nearly 9.2 million subscribers, helping to illustrate the magnitude of its outperformance.
The future looks bright
If that weren't enough, management increased its guidance for 2025. Netflix is now forecasting revenue of $44 billion at the midpoint of its guidance while increasing its operating margin outlook to 29%, up from its previous guidance of $43.5 billion and 28%, respectively.
Management laid out a number of drivers that will fuel future growth, including:
-
An ongoing strong content push
-
Continued expansion of its ad-supported tier
-
Increasing its live content push
Despite Netflix's long track record of strong results, the stock remains attractively priced, at 36 times next year's expected earnings. While that's certainly a premium, consider this: Netflix stock gained 83% last year, more than three times the return of the S&P 500.(SNPINDEX: ^GSPC). The streaming pioneer has also soundly thrashed the broader market results over the past three-, five-, and 10-year periods.
Given its track record, I would suggest it's worthy of a premium.
Should you invest $1,000 in Netflix right now?
Before you buy stock in Netflix, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $863,081!*
Now, it’s worth noting Stock Advisor’s total average return is 894% — a market-crushing outperformance compared to 176% for the S&P 500. Don’t miss out on the latest top 10 list.