Netflix Stands Strong Amid Market Turmoil and Trade Fears
As the stock market grapples with the impact of Trump’s newly announced reciprocal tariff plans, few technology stocks have managed to escape the tech-driven selloff initiating 2025. Among those that have, Netflix NFLX warrants particular attention.
Forecasts indicate heightened volatility for both the U.S. and global economies in the coming weeks. Should panic set in, the next few weeks could prove challenging for stock markets as Wall Street shifts to a more risk-averse stance.
Despite a recent downturn, the S&P 500 has gained nearly 40% over the past two years and 110% over the last five. While a significant selloff was expected, further declines may present strong buying opportunities for long-term investors.
In a globally interconnected economy, no tech companies can wholly escape the effects of trade levies.
Instead of abandoning the market—which can severely harm long-term performance—investors should consider acquiring top-tier stocks that will be less affected by tariffs compared to the broader tech sector.
Why Netflix Remains a Strong Buy Amid Tariff Concerns
Once a standout in the tech industry during the 2010s, Netflix has reshaped entertainment and consistently outperformed numerous major technology firms over the past two decades, remaining on par with Nvidia.
Netflix’s first-mover advantage combined with their investment in original content has kept them at the forefront of a competitive landscape that now includes streaming giants like Disney, Apple, and Amazon.
Image Source: Zacks Investment Research
The company has broadened its offerings to include live sports, reality TV, and blockbuster movies, which has successfully attracted and retained subscribers. Netflix is also venturing into video game content, enhancing its diverse portfolio.
After experiencing lows in 2022, Netflix has rebounded impressively, outpacing all but Nvidia among the Magnificent 7 stocks over the past three years.
The introduction of a lower-cost, ad-supported subscription plan in late 2022 played a significant role in this recovery. Notably, this ad tier accounted for over 55% of sign-ups during Q4 in regions where it was available. The final quarter of 2024 saw Netflix adding 18.9 million paid subscriptions, nearly doubling previous forecasts.
Furthermore, Netflix declared this to be its “biggest quarter of net adds in our history,” surpassing the previous record of 13 million from Q4 FY23.
Image Source: Zacks Investment Research
By the end of 2024, Netflix reported 301.63 million global paid memberships, reflecting a 16% annual growth. Its ad-based plan, priced at $7.99, remains competitive against Disney’s $9.99 option and other bundled services.
Highlighting Netflix’s Strong Financial Fundamentals
In 2024, Netflix achieved a revenue growth of 16%, totaling $39 billion. Although the company’s revenue growth may not return to pre-COVID heights, recent performance indicates a rebound into robust double-digit expansion after experiencing 7% growth in both FY22 and FY23.
Looking ahead, it is expected that Netflix will average 13% revenue growth in 2025 and 2026, potentially reaching approximately $50 billion by FY26—doubling its total from 2020.
For earnings, Netflix is projected to see a 24% rise in 2025 and a 21% increase in FY26, reaching $29.66 per share. This anticipated growth follows an impressive 65% expansion in earnings last year, indicating a trajectory of upward momentum.
The company also continues to strengthen its financial position, as its board approved an additional $15 billion stock buyback program.
Image Source: Zacks Investment Research
In the last decade, Netflix shares have soared 1,300%, outpacing the Nasdaq’s growth of 230% and all but Nvidia among the Magnificent 7 stocks. Remarkably, the stock has appreciated by 55,000% from its initial public offering.
Netflix Outperforms Market Amid Tariff Concerns and Strong Growth
Over the last 20 years, Netflix (NFLX) has positioned itself as a formidable player in the entertainment sector. Recently, the company has experienced substantial growth, with its stock increasing by 130% in the last three years, outpacing the Nasdaq’s mere 14% increase. In a two-year perspective, NFLX soared by 165%, while the Nasdaq gained only 35%. Moreover, in the past year, Netflix achieved a remarkable 48% rise compared to the index’s modest 3%.
This recent success is attributed partially to Netflix’s growth potential that does not rely on the speculative nature of artificial intelligence innovations, nor does it involve extensive capital expenditures reaching into hundreds of billions.
Image Source: Zacks Investment Research
From a valuation standpoint, Netflix is trading at over a 90% discount compared to its 10-year highs and is 50% below its five-year peak. Currently, the stock is priced at a 38% discount to its 10-year median, which stands at 36.2x forward earnings. The price-to-earnings-to-growth (PEG) ratio for NFLX is 1.8, which is relatively close to the technology sector’s average PEG of 1.5. Notably, Netflix has outperformed its peers in this sector.
Netflix has maintained its position near the 21-week moving average, approaching several of its breakout levels from pre-Q4 releases.
This may be an opportune moment for investors who want to remain engaged with the stock market amidst growing tariff concerns to consider purchasing shares of Netflix.
In brief, the demand for at-home entertainment remains strong, as consumers will continue to allocate funds toward it regardless of market conditions. Unlike many of its large tech counterparts, Netflix is less vulnerable to tariff impacts. Additionally, speculation of a potential stock split could also encourage investor interest.
7 Best Stocks for the Next 30 Days
Recently released: Experts have identified seven elite stocks from a pool of 220 Zacks Rank #1 Strong Buys, labeling them as “Most Likely for Early Price Pops.”
Since 1988, this comprehensive list has delivered more than double the market’s return, averaging a gain of +23.9% per year. These handpicked selections deserve immediate attention.
Looking for the latest insights from Zacks Investment Research? Download the report on the 7 Best Stocks for the Next 30 Days today.
Netflix, Inc. (NFLX): Free Stock Analysis report
NVIDIA Corporation (NVDA): Free Stock Analysis report
This article was originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
