The market's impressive performance created numerous trillion-dollar companies. Due to their remarkable successes, these businesses have for the most part earned their place among the elite group.
There's one particular industry-leading, tech-forward enterprise -- with a market cap of $434 billion -- that is rapidly ascended the ranks. It deserves to be in the discussion as a possible entrant to the trillion-dollar crew in the future.
Can this one unstoppable stock join Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla in the $1 trillion club by 2035?
Dominating the streaming landscape
In the past decade, shares of Netflix (NFLX +0.16%) soared 1,500%. That rise is due to the company's impressive job at disrupting the media industry. Netflix created the streaming category. And its focus on innovation to better serve consumers in the internet age certainly allows it to be mentioned in the same breath as the other dominant tech titans.
NASDAQ: NFLX
Key Data Points
Growth has been a key part of the story. Netflix has 302 million subscribers in 190 countries across the globe. That's up from 167 million members from five years ago. This propelled revenue, which soared 15.6% in 2024.
The company keeps finding ways to attract a larger audience. Its efforts to crack down on password-sharing, as well as the successful launch of a cheaper ad-supported tier, are examples of steps management took to better monetize its platform. Getting into live events and sports to boost engagement is another way.
Its ability to generate profits is exceptional. This is only possible because of Netflix's massive scale that stems from its first-mover advantage, which puts it ahead of the rest of the industry.
Management is aiming for a 29% operating margin this year, with free cash flow forecasted at $8 billion. Executives are focused on efficiently spending on content.
And with proven pricing power, it's no surprise that Netflix's financial situation continues to improve. Because of the value it provides viewers, it has been able to raise subscription prices consistently. That's a wonderful trait to have.
Running the numbers
In order for Netflix's market cap to reach $1 trillion in a decade, it would need to expand by 130%. In the past 10 years, its market cap has climbed 1,500%. So, investors are asking for a major slowdown to occur in order to hit that milestone. That seems reasonable, to say the least.
The valuation must be considered as well. As of this writing, shares trade at a price-to-earnings ratio (P/E) of 50.9. Assuming that multiple gets cut in half to 25 by 2035 (which I don't think is out of the question given that Netflix will be a much more mature enterprise in a decade), then this implies that earnings per share (EPS) need to grow about 16.5% per year.
In the past 10 years, EPS increased at a compound annual rate of 41.4%. Therefore, I think there's a very strong likelihood that based on its current trajectory, the company will indeed enter the exclusive $1 trillion club in 10 years.
Be patient
Just because the business is on its way to being valued at a 13-figure sum, it doesn't necessarily mean you should rush to buy the stock. To be clear, I still view the current valuation as being on the expensive side.
Yes, the business is thriving right now. But the P/E leaves no margin of safety for investors. Netflix must continue executing flawlessly with no hiccups to justify paying a steep price tag. The best thing investors should do is wait for a better entry point before buying this industry-leading company.
