Tech’s Exciting Surge: Nasdaq and Netflix Soar to New Heights
The Nasdaq Composite has embarked on an impressive upward journey lasting over two years, continuing to defy expectations. Several elements have fueled this rally, including decreasing inflation, lower interest rates, rising corporate earnings, and the rapid rise of artificial intelligence (AI). Having climbed 43% in 2023, the tech-focused index saw an additional 29% rise in 2024. Such back-to-back increases hint at a promising future, as historical trends indicate this bull market is likely to persist.
Looking back to 1972, the Nasdaq’s inaugural year, the trend is clear: whenever it achieves gains exceeding 28%, it typically sees additional growth of an average of 19% in the following year. This pattern suggests even greater potential ahead. Furthermore, bull markets typically last around 1,866 days—more than five years on average. As the current bull market just celebrated its two-year milestone in October, history supports the idea that there is more momentum to be gained.
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Netflix Shows Remarkable Growth
Netflix (NASDAQ: NFLX) may not be the first company that springs to mind when thinking of unstoppable stocks, yet its performance tells a different story. Over the last decade, the streaming giant has soared by an astonishing 1,740%. This impressive trajectory isn’t confined to the past; it experienced an 83% increase last year, nearly tripling the Nasdaq’s gains and has already outperformed the tech index in early 2025. Recent reports hint at even more growth on the horizon.
Strong Earnings Report
Netflix has just released its fourth-quarter results and surpassed expectations across all significant metrics. Revenue reached $10.2 billion, reflecting a 16% year-over-year growth. This success drove earnings per share (EPS) to $4.27, an impressive 102% increase. Subscriber growth played a vital role as Netflix added over 18.9 million new paid users, a remarkable 44% increase and the highest quarterly rise in its history. Operating margins also improved significantly, climbing 530 basis points to 22.2%.
For context, analysts had predicted revenue of $10.1 billion and EPS of $4.20, along with subscriber additions of 9.18 million. Netflix not only met but exceeded these expectations.
Looking forward, the company remains optimistic about its growth. Netflix projects first-quarter revenue to reach $10.4 billion, an increase of more than 11%. EPS is also expected to rise to $4.23, marking a nearly 6% bump despite challenging foreign currency conditions due to a strong dollar.
Moreover, management has set a solid full-year revenue forecast of $44 billion for 2025, indicating approximately 13% growth. They have also raised their operating margin outlook to 29% from 27% for 2024, showcasing the company’s ability to enhance profitability alongside growth.
Factors Behind Netflix’s Rise
Several key drivers contributed to Netflix’s remarkable growth in Q4:
- Squid Game 2 is poised to become one of the company’s most-viewed original series.
- Carry-On rapidly ascended to Netflix’s all-time Top 10 films list.
- The Jake Paul vs. Mike Tyson fight achieved the status of the “most-streamed sporting event ever.”
- On Christmas Day, Netflix streamed “the two most-watched NFL games in history.”
Looking to the future, management identified three major opportunities for ongoing growth.
Netflix has been dipping its toes into video gaming and achieved a significant milestone in Q4. The game Squid Game: Unleashed, based on its hit series, became the top free game in the Apple App Store in 107 countries, potentially making it Netflix’s “most downloaded game” yet. The company plans to harness this success by offering more “best-in-class titles” inspired by its intellectual property, alongside developing party games, children’s games, and licensed titles like Grand Theft Auto.
Consistent with its past success, Netflix has ambitions to broaden its live streaming offerings. The company is adding to its 52 weekly episodes of WWE Monday Night Raw—a highly popular wrestling show—with the Screen Actors Guild (SAG) Awards, a new variety talk series hosted by John Mulaney, and NFL games on Christmas Day in 2025. Notably, Netflix has secured U.S. broadcast rights for FIFA Women’s World Cup Soccer in 2027 and 2031.
Additionally, thoughts of future growth are linked to the rapid expansion of its advertising business. Members opting for the advertising tier surged by 30% quarter over quarter, making up 55% of new subscribers in regions where ads are shown. This expanding audience increases Netflix’s value to advertisers.
To further enhance its earnings, Netflix has decided to raise subscription prices across the board, including on its lowest-priced ad-supported plan. The adjustments will be implemented in the U.S., Canada, Portugal, and Argentina. Management cites the company’s robust programming lineup and strong engagement levels as the rationale behind these increases.
Currently, Netflix trades at about 36 times its anticipated 2025 earnings, which some may see as pricey. Nonetheless, given its ability to consistently exceed expectations, that valuation seems fair. With such strong growth prospects, 2025 could signal another exceptional year for Netflix investors.
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Danny Vena has interests in Apple and Netflix. The Motley Fool also holds positions in and endorses Apple and Netflix. 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.