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Netflix (NFLX) needs no introduction. Founded in 1997, it has grown into a multibillion-dollar media powerhouse, boasting over 302 million subscribers globally by 2024. The company operates on a subscription-based model and offers a vast selection of movies, TV shows, and original content. Netflix’s stock jumped 90.2% last year, significantly outperforming the overall market. The company ended 2024 with impressive quarterly results, and Wall Street anticipates strong growth this year. Let’s examine its earnings report to determine whether the stock is a good buy now.
How Did Netflix Fare in 2024?
Netflix primarily generates revenue through monthly subscriptions and has made significant investments in exclusive content, including award-winning shows like Stranger Things, The Crown, and Squid Game. This original programming sets Netflix apart from competitors and helps retain subscribers. In the fourth quarter, Netflix reported $10.2 billion in revenue, reflecting a 16% year-over-year increase, driven by 19 million net new paid subscribers. The company achieved net income of $4.27 per share, marking an impressive 102.3% growth compared to the previous year. Both revenue and earnings exceeded consensus estimates. Netflix’s ability to sustain profitability while continuing to invest in original content highlights its operational efficiency.
In 2024, the company generated $6.9 billion in positive free cash flow, enabling it to reduce debt and repurchase $6.2 billion worth of shares. Netflix's total debt stood at $15.7 billion, with cash and cash equivalents amounting to $7.8 billion. Its debt-to-equity ratio of 0.56x indicates improved financial stability. Looking ahead, Netflix anticipates generating $8 billion in free cash flow in 2025 which should further help pay down the debt.
The streaming industry, however, has become increasingly competitive, with established players like Disney (DIS), Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL), alongside new entrants, vying for market share. Despite this competition, Netflix retains its leadership position, thanks to its scale, diverse content offerings, and global presence. However, retaining subscribers and controlling content costs will remain an ongoing challenge for the company. Emerging markets such as Africa, Southeast Asia, and Latin America remain underpenetrated. By tailoring pricing and content strategies, Netflix can tap into these high-growth regions.
Looking ahead to 2025, Netflix is enthusiastic about returning hit shows like Squid Game, Wednesday, and Stranger Things. The company plans to strengthen its core business by producing more content that resonates with viewers while expanding its ads business. Additionally, Netflix is exploring new initiatives like live programming and gaming. For 2025, the company projects revenue growth of 12% to 14%, reaching $43.5 billion to $44.5 billion, with an operating margin of 29%.
Analysts expect revenue to grow by 13.5% in 2025 and 12% in 2026, with earnings rising by 25.3% and 22.1% over the next two years. While Netflix stock trades at 39 times forward 2025 earnings —appearing high — it is relatively low compared to its five-year average price-to-earnings ratio of 67.9x.
Is Netflix Stock a Buy?
Following robust quarterly results, many analysts reaffirmed their “Buy” ratings, citing Netflix’s strong brand, market leadership, and effective monetization strategies as key drivers of optimism. For instance, DBS analyst Sachin Mittal maintained a bullish outlook with a price target of $1,058, emphasizing that Netflix’s focus on ad-supported plans and paid-sharing initiatives is likely to drive continued subscriber and revenue growth. Similarly, JPMorgan analyst Doug Anmuth echoed this sentiment, asserting that Netflix’s solid market position and growth potential justify its premium valuation.
Market sentiment suggests Netflix stock is a “Moderate Buy.” Of the 42 analysts covering the stock, 27 recommend a “Strong Buy,” two rate it as a “Moderate Buy,” and 13 suggest holding. Based on an average price target of $1,059.47, Wall Street anticipates potential upside of approximately 9% over the next 12 months. The highest target price of $1,494 indicates the stock could gain as much as 54% this year.
The Bottom Line on NFLX Stock
Netflix’s strong brand, extensive content library, and global presence create a solid base for future expansion. However, it faces challenges such as increasing competition, rising content expenses, and market saturation in critical areas. Netflix’s market reach, along with strategic moves like its ad-supported model, gaming initiatives, and focus on emerging markets, holds the potential to deliver long-term value. While the stock has a strong chance of reaching $1,500 this year, I believe it is a better investment for the long term given the continued evolution of digital entertainment.
