Revisiting Netflix: A Tech Stock Worth Noticing in 2024
In today’s tech environment, a company must be in artificial intelligence (AI) to gain attention. I admit I have overlooked Netflix (NASDAQ: NFLX), which has quietly surged over 50% this year, positioning it as the third-best performer among the “Magnificent Seven” stocks, behind Nvidia and Meta Platforms.
Is Netflix proving itself as a top tech stock? Its recent performance suggests it might just be the case.
Impressive Earnings Signal Netflix’s Comeback
After falling off investors’ radars due to a significant drop in mid-2022, Netflix has seen a remarkable recovery since bottoming out in July of that year. Recently, the company reached a new all-time high.
Concerns over Netflix’s ability to turn streaming into a profitable venture have diminished as the company has made successful moves, such as introducing an advertising tier and cracking down on password sharing to bolster profits.
In the third quarter, Netflix reported a 15% increase in revenue to $9.8 billion, marking four straight quarters of mid-teens growth. For the fourth quarter, management anticipates a further revenue growth of 14.7%.
More importantly, as Netflix matures, the focus pivots to profitability. In Q3, the earnings per share (EPS) reached $5.40, a 45% increase from $3.73 a year ago. The projection for Q4 stands at $4.23 EPS, reflecting a whopping 100% year-over-year growth.
This strong performance led to an 11% spike in Netflix’s stock price the day following the earnings announcement.
Assessing the Valuation of Netflix Stock
Despite its impressive growth, Netflix stock comes with a hefty price tag. The company’s valuation is high, standing at 43 times trailing earnings and 32 times estimated earnings for 2025, making it pricier compared to several tech competitors.
NFLX PE Ratio data by YCharts
If we compare Netflix to Meta Platforms, which has also outperformed this year, the differences in valuation are apparent. Meta’s revenue rose by 22% while EPS surged by 73%. Yet, Netflix appears pricier, trading at 30 times trailing earnings and 24 times 2025 earnings.
This doesn’t necessarily mean Netflix is a less favorable stock. Unlike Meta, much of Netflix’s income doesn’t rely on advertising, which is subject to market fluctuations. As a subscription service with an ad model, Netflix offers a more diversified revenue stream.
While Netflix is no longer a bargain stock, it has proven worthy of trading at these elevated price levels. From its solid performance and strategic plans for growth, such as expanding into live sports in Q4, Netflix is reclaiming its place among premium tech stocks. Yet, investors must remain cautious; the stock’s rich valuation demands sustained operational excellence.
Should You Put $1,000 into Netflix Now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Netflix, and Nvidia. The Motley Fool has a disclosure policy.
The views expressed in this article are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
