Shares of Netflix (NASDAQ: NFLX) are set to start trading on a split-adjusted basis on Nov. 17, following a 10-for-1 stock split. This move comes as the company’s revenue growth has been accelerating in recent quarters, with a 17.2% year-over-year increase in the third quarter and a projected 17% increase for the fourth quarter. This growth is being driven by a combination of price hikes, membership growth, and increased advertising revenue.
One key aspect of Netflix’s growth story is its fast-growing advertising business, which is expected to more than double in revenue by 2025. This diversification can widen Netflix’s growth runway and bolster profits over time. Additionally, the company’s core business is already driving operating margin expansion, with a projected increase from 27% in 2024 to 29% in 2025.
While the stock split doesn’t change the company’s value, it does make shares more accessible to employees participating in the stock option program. From an investor standpoint, the stock’s valuation is important to consider. As of now, Netflix trades at a price-to-earnings ratio of over 47, but its forward P/E ratio sits at a more reasonable 35. This figure, combined with the company’s market leadership and growth trends, makes Netflix an attractive investment opportunity.
Despite the positive outlook, it’s essential to be aware of the competitive landscape in the streaming industry. Netflix faces intense competition from tech giants with significant content spending capabilities. As such, investors should approach their position in Netflix cautiously and monitor industry developments that could impact the investment thesis.
In conclusion, Netflix remains a buy even after the stock split, given its strong business performance and growth prospects. Investors should consider the company’s financial metrics, competitive positioning, and future opportunities before making any investment decisions.
