Will Netflix’s Soaring Stock Prompt a Split in 2025?

High-performing companies are known to create lasting value, often resulting in stock prices that balloon into the hundreds or thousands of dollars. This can pose difficulties for everyday investors who wish to buy shares.

One common solution is a stock split, which boosts the number of shares while lowering the price per share proportionately. For instance, a 10-for-1 stock split increases the total share count by ten and brings down the share price to one-tenth of its original amount.

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It’s essential to note that a stock split is mainly cosmetic. It neither alters the company’s actual value nor its market presence. Instead, it enhances accessibility for small investors.

This brings us to Netflix (NASDAQ: NFLX). Its share price is nearing $1,000, driven by excellent financial results for 2024. With this backdrop, could a stock split be on the horizon for Netflix in 2025?

Netflix Surpasses Subscriber Expectations in Q4 2024

In the fourth quarter of 2024, Netflix added 18.9 million new subscribers, exceeding Wall Street’s forecast of 8.2 million. This upswing brought its total subscriber count to an impressive 301.6 million, reinforcing its standing as the leading global platform for streaming movies and TV shows. Comparatively, Disney’s Disney+ lags behind with only 122 million subscribers.

A myriad of factors contributed to Netflix’s current success, particularly its strong array of content. Yet, the game changer has been the launch of its advertising subscription tier in 2022. For just $7.99 per month, subscribers can enjoy Netflix with ad interruptions, a significant discount from its standard ($17.99) and premium ($24.99) plans.

In Q4 2024, the advertising tier represented 55% of new sign-ups in the regions where it is offered. Moreover, memberships in this category rose by 30% from the previous quarter. Each ad-supported subscriber will grow increasingly valuable as Netflix expands its advertising platform. Companies will pay more to reach these viewers over time.

Netflix reported that its advertising revenue doubled in 2024 compared to the previous year and anticipates another doubling in 2025.

The streaming giant set a new record with total revenue of $39 billion in 2024, marking a 15.7% increase from the prior year, a significant leap from the 6.6% growth seen in 2023. This acceleration signals Netflix’s formidable momentum.

Additionally, the company’s earnings per share (EPS) skyrocketed by 64.8%, reaching a historic high of $19.83, further underscoring its competitive edge, especially while many rivals are still struggling financially.

Image source: Netflix.

The Impact of Live Programming on User Engagement

To maximize advertising revenue, Netflix aims to explore new methods to enhance user engagement. Engaged viewers see more ads, thereby attracting more revenue. Currently, subscribers average two hours of viewing daily, but live programming shows potential for increased engagement.

This past Christmas Day, Netflix streamed two NFL games, drawing 30 million and 31 million viewers, making them the most-watched NFL games ever. Given the typical length of a football game, those who watched contributed significantly to engagement metrics.

Earlier in November, the boxing match between Mike Tyson and Jake Paul set a record for live streaming sports events, garnering immense viewership.

Netflix’s recent deal with TKO Sports allows it to exclusively stream World Wrestling Entertainment (WWE) content, starting this month. Fans can catch WWE Raw every week, with SmackDown and NXT also available outside the U.S. The agreement includes various major live events such as WrestleMania and SummerSlam.

Netflix plans to pump $18 billion into content in 2025 to solidify its market position. However, live events are only one aspect of its overall strategy. Currently, the company believes it has tapped only 6% of its potential $650 billion global entertainment market, which encompasses subscriptions, advertising, and gaming.

Netflix’s Stock Valuation Suggests Further Growth Ahead

Shifting focus to Netflix’s valuation, the stock trades at a price-to-earnings (P/E) ratio of 49.6, slightly lower than its five-year average of 51.6. According to Wall Street’s consensus provided by Yahoo, the EPS could reach $24.69 by 2025, resulting in a forward P/E ratio of 39.9. Furthermore, projections indicate that in 2026, EPS may surpass $30, which would place the stock at a forward P/E of 32.8.

NFLX PE Ratio data by YCharts.

If Wall Street’s forecasts hold true, Netflix stock would need to surge by 51% over the next two years just to sustain its current P/E ratio. With shares approaching $1,000, they may soon become financially out of reach for some everyday investors eager to buy a complete share.

Given these circumstances, a stock split seems likely in 2025. This would mark Netflix’s third split, as it last executed one in 2015 when the stock was valued at $800. A repeat of a 10-for-1 split could drive the stock price down to approximately $98.40, making it more accessible for a broader range of investors.

Notably, well-known companies like Nvidia and Broadcom have also recently pursued 10-for-1 stock splits, indicating a positive trend within the market.

Consider This Opportunity Before It’s Too Late

Have you ever felt you missed the opportunity to invest in successful stocks? If so, stay tuned.

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• Netflix: If you invested $1,000 when we recommended it in 2004, you’d have $527,206!*

Right now, “Double Down” alerts are active for three outstanding companies, and this may be your last chance for some time.

Learn more »

*Stock Advisor returns as of January 21, 2025

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Nvidia, and Walt Disney. The Motley Fool recommends Broadcom and TKO Group Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.