Netflix (NFLX -0.67%) stock has recently blown past $1,200 per share, making it hard to believe that shares traded at levels below $200 as recently as May of 2022. And the stock's momentum is strong this year, too. Shares are up about 40% this year alone, defying the market's sluggish return of less than 2% as of this writing.
With a combination of a strong business, impressive stock price momentum, and a share price in the thousands, a stock split could be in the cards for the streaming giant soon.
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Impressive fundamentals
Netflix's performance has been stellar. In the first quarter of 2025, revenue rose 12.5% year over year to about $10.5 billion, and earnings per share soared 25.2%. Helping the company achieve such strong earnings-per-share growth is Netflix's widening operating margin. The key profitability metric hit 31.7% in the quarter, up from 28.1% in the year-ago period. The company also reported free cash flow of $2.7 billion, up 25% year over year.
Netflix's business growth has been fueled primarily by three key tailwinds: membership growth, price increases, and a fast-growing advertising business. Importantly, the company believes all three of these catalysts have room to run. In its first-quarter update, management reaffirmed its guidance for full-year revenue to increase 11.5% to 14.1% year over year. This growth, management explained, "assumes healthy member growth, higher subscription pricing and a rough doubling of our ad revenue ... " Additionally, management continues to forecast a full-year operating margin of 29%, up substantially from 26.7% in 2024.
A stock split could be coming soon
Netflix hasn't split its shares since 2015. Back then, a 7-for-1 split lowered the stock price from about $700 to $100. Today, the share price is nearly double its pre-split peak. That alone doesn't guarantee a stock split. But historically, splits are more likely when a stock becomes expensive (in terms of the share price) relative to other megacaps and the company is on solid footing. Netflix checks both boxes.
There's a sense of déjà vu with Netflix today. Just as has been the case recently for the company, it was experiencing strong subscriber growth, record earnings, and benefiting from strategic catalysts the last time it split its stock.
Also strengthening the case for a stock split, Netflix shares currently trade far higher than other tech leaders like Microsoft, Meta Platforms, Apple, and Nvidia.
Of course, a stock split would not affect the company's fundamentals, but it would lower the price per share and make Netflix more accessible to retail investors. But it's worth emphasizing that a stock split, in and of itself, isn't a reason to buy a stock. It is, however, often a symptom of strong underlying business momentum -- momentum strong enough to cause investors to bid up the share price to a level worthy of a stock split.
It's also worth noting that even though Netflix's business is doing extraordinarily well, investors seem to already be pricing in this momentum. Shares trade at 59 times earnings. All else equal, this valuation multiple will likely come down meaningfully if the company delivers on its revenue growth and operating margin expansion targets for the full year. A combination of double-digit revenue growth and margin expansion should help earnings per share grow dramatically. But with a price-to-earnings multiple well in excess of even fast-growing tech giant Nvidia's, investors seem to be already betting on more staggering growth from the streaming giant.
With a surging stock price, impressive revenue growth, and a nascent and fast-growing advertising business, Netflix is a top contender for the next big tech stock split. Though the company hasn't announced plans to split its shares, it's starting to look overdue.
