Netflix (NFLX +0.96%) shares hit another all-time high last week, prompting another analyst to jack up a seemingly dated price target on Wednesday of this week. Benjamin Swinburne at Morgan Stanley is raising his goal for the streaming video pioneer to $1,050. It's a $220 increase from his previous target, but it's not as if Swinburne sees a 27% -- or $220 -- jump from where the shares are now. Netflix is already nearly halfway to the Wall Street pro's new goal.
Swinburne isn't even the high-water mark among his peers. Jeffrey Wlodarczak at Pivotal Research set a $1,100 price target last month. And that came following the Mike Tyson and Jake Paul fight in November that was streamed live on Netflix with technical issues. Wlodarczak dismissed the well-publicized hiccups as a learning opportunity. Some bulls will go to great lengths to justify their rosy glasses.
This brings us to Netflix and its mammoth share price. The stock's cost is approaching four figures now. How much longer will the profitable streamer go without declaring a stock split? Unless it corrects sharply in the coming year, it would be surprising to see Netflix not split its shares at some point in 2025.
NASDAQ: NFLX
Key Data Points
Streaming on all cylinders
Netflix stock is as red-hot as its logo these days. The shares are up 89% so far this year through Tuesday's close, more than tripling since the start of last year.
The platform continues to be a global leader. There are 283 million paid subscribers on the platform, 14% more than it was serving a year earlier.
With folks paying more digital entertainment, revenue is growing faster than its audience. Revenue rose 15% to $9.8 billion in its latest quarter. This is the case even with 70 million of those subscribers signing up to the cheaper ad-supported plan that Netflix introduced two years ago.
Growth in the mid-teens may not seem impressive for a stock that has been soaring over the past two years, but this follows single-digit revenue growth in 2022 and 2023. The business is accelerating despite its already massive reach.
This is a scalable model, as its content costs continue to be divided into larger subscriber counts. It's not a surprise that the bottom line is growing faster than the top line. Its operating profit and earnings per share shot 52% and 45% higher, respectively, in the third quarter. Three months earlier, Netflix was only modeling a 33% gain in earnings.
Where do we go from here? Netflix guidance calls for 11% to 13% in revenue growth for 2025, decelerating from current levels. However, it does see its operating margin continue to widen next year. In short, the near-term outlook for the digital platform continues to be robust.
Image source: Getty Images.
A splitting headache
The chances are good for Netflix stock to execute a split in 2025. The last time it went this route was in the summer of 2015, nearly a decade ago. The stock price was lower than it is now heading into that 7-for-1 split.
One can argue that splits don't matter, and that's fair. It's a zero-sum game. In a world where fractional shares are easily accessible and the market indices that matter aren't price-based, the reasons to split aren't the same as they were a couple of decades ago. However, you do have to factor in what a four-figure price does for a small investor trying to place an options trade on Netflix. There is also a natural psychological barrier to some individual investors that equate large prices with ships that have already sailed.
Netflix is a strong candidate for a stock split in the coming year. It's still the top dog of streaming services stocks, and momentum is on its side heading into 2025. If it does crack the $1,000 ceiling -- and that may very well happen before the end of this year -- it could announce a split as soon as its mid-January earnings report.
Like its 283 million subscribers, a lot of investors will also be watching Netflix.
