Netflix (NFLX +2.67%) just reported financial results for the first quarter of 2025 (ended March 31). Its revenue jumped 12.5% year over year to $10.5 billion, while diluted earnings per share surged 25.2%. Both of these headline figures exceeded Wall Street expectations, highlighting the global entertainment powerhouse's continued momentum. Shares immediately popped 5% following the announcement.
However, there was a more striking bit of news that preceded the latest financial update. The Wall Street Journal reported earlier in the week that management set an explicit target for Netflix to reach a $1 trillion market cap by 2030. Compared to the current market cap of $416 billion (as of April 18), this represents meaningful upside of 140%.
Knowing that the leadership team has its sights on a big prize, should investors scoop up the top streaming stock right now with $2,000?
Strength with key metrics
Netflix's playbook to join the illustrious 13-figure club, which right now only contains eight companies, is a clear one. Unsurprisingly, it requires ongoing strength with key metrics important to the business.
For starters, the goal is to double revenue from $39 billion in 2024 to $78 billion in 2030. This translates to a 12.2% compound annual rate. In the past six years, the top line grew at a yearly pace of 16.3%.
Getting ad sales to $9 billion in 2030 is also a top priority. Since launching these cheaper plans, Netflix has seen phenomenal demand. The company expects ad revenue to double in 2025.
As of Dec. 31, Netflix counted 302 million subscribers. Executives want to see that number get to 410 million in 2030. So on average, the plan entails adding roughly 18 million customers annually over each of the next six years, including 2025. There is a focus to further penetrate India and Brazil, countries with high broadband internet access.
Netflix added 163 million members in the past six years, so the forward outlook seems reasonable. It will be challenging for investors to gauge subscriber growth going forward, though. That's because Netflix stopped reporting on this critical data point, instead urging shareholders to pay attention to other financial figures.
On the profitability front, Netflix generated $10.4 billion in operating income in 2024. By 2030, management wants that number to triple to $31 billion. Based on the estimated revenue of $78 billion at the end of the decade, this indicates a fantastic 40% operating margin.
NASDAQ: NFLX
Key Data Points
Setting the right expectations
Netflix shares have been a monster winner for long-term investors. As a result, the company's market cap has also surged. But it might be a stretch to believe there's a high probability its market cap can climb 140% to $1 trillion in the next five or so years. That potential gain would be bigger than what Netflix achieved in the last five years.
I'm not confident forward returns will exceed past results. To be fair, under management's outlook, tripling operating income would be a great outcome that could drive the share price higher. But the current valuation is already steep, which can hinder upside. As of this writing, the stock trades at an EV (enterprise value) to EBIT (earnings before interest and taxes) multiple of 39.4.
This is certainly a disruptive enterprise that dominates the streaming landscape. But it's difficult to envision that an already massive business can generate a better return than what it produced since April 2020. I'm not optimistic it can get to a trillion-dollar market cap by 2030. The target could be more achievable by 2035, perhaps.
Those with $2,000 ready to invest must assess how critical valuation is to their decision-making process. In my opinion, the best course of action is to be patient until the market offers a better deal.
