Netflix Readies for Fourth-Quarter Results Amid Stock Split Speculations

Netflix (NASDAQ: NFLX) is set to unveil its fourth-quarter earnings on Tuesday afternoon, coinciding with the market’s first trading day of the holiday-abridged week. Investors are buzzing with anticipation as the company’s share price holds at impressive levels.

In 2024, Netflix’s stock surged 83%, reaching an all-time high last month. This puts the company just 17% shy of passing the significant $1,000 mark. A robust financial update this week could potentially push it across that threshold. If Netflix delivers even a reasonably solid report, some analysts foresee the stock entering four-figure territory later this year. There is speculation that a stock split announcement could follow right after the earnings report if the results are positive.

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High Expectations for Financial Performance

As Netflix approaches its earnings release, expectations are soaring. In mid-October, the company projected a 15% revenue increase for the fourth quarter, consistent with the same year-over-year growth it reported in the third quarter. On the income side, analysts anticipate an operating margin of 22%, significantly up from last year’s fourth-quarter 16.9% margin.

Analysts forecast Netflix’s revenue will rise 14% to $10.1 billion in Tuesday’s report, slightly under its guidance. They expect earnings per share to nearly double to $4.20, a notable shift for a company that has exceeded Wall Street’s profit targets for the last three quarters.

The potential for a stock split could be driven by the company’s public image. As a consumer-driven business providing an affordable subscription service, Netflix may prefer not to flaunt a huge stock price. While it’s unlikely that most of its 283 million paid subscribers would cancel over stock prices, a high share price could complicate future pricing strategies. The company isn’t keen to join the ranks of the 18 U.S. companies currently boasting market caps above $1,000.

Image source: Getty Images.

A stock split would also be practical. While the transaction itself doesn’t change ownership structure (100 shares at $1,000 becomes 1,000 shares at $100), it does lower barriers for potential investors. Despite the availability of fractional shares, a high price can deter smaller investors, something Netflix likely wants to avoid.

Historically, Netflix has executed stock splits only twice, both at lower price points. The last occurred nearly 10 years ago, in 2015, with a 7-for-1 split. Now may be the right time for another split, as it would indicate confidence in continued stock price growth. Unlike the past, the current market isn’t focused on who has the highest stock prices.

Netflix’s trajectory indicates solid growth. Even though Netflix anticipates revenue growth will slow to an 11% to 13% range in 2025, this represents back-to-back years of double-digit gains after a few years of minimal increases. Analysts expect earnings per share to rise by 20% in the upcoming year.

With promising trends and strong earnings predictions, Netflix appears poised to announce a stock split. The pressure now lies on delivering an outstanding quarterly report.

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Rick Munarriz has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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