In the past couple of decades, technology enterprises have become very influential to our society and economy. These businesses lean heavily on technology to deliver invaluable products and services to customers across the globe. The six most valuable companies are Microsoft, Nvidia, Apple, Amazon, Alphabet, and Meta Platforms (as of July 6).
It's no surprise that their stock prices have been monster winners for investors over the years. But there's one superb business that's not on this exclusive list, and its shares are up a jaw-dropping 1,270% in the past 10 years and 59,140% in the past 20 years.
Can this unstoppable stock make the leap and join those others in the $1 trillion club?
Image source: Getty Images.
Netflix is an elite company
Netflix (NFLX 0.10%) might be left out of the so-called "Magnificent Seven," but don't let that mask how great of a business this is. Looking at those previously mentioned trillion-dollar companies, I'd argue Netflix deserves to be mentioned in the same category.
It has leveraged its data capabilities, technological infrastructure, and the wide reach of the internet and connected devices to build a global-scale media powerhouse. Perhaps no company has truly disrupted its industry and become such a dominant force in recent memory like Netflix has.
About two decades ago, early executives, most notably co-founder Reed Hastings, figured out that the internet was going to dramatically alter how people consumed video entertainment. The days of being forced to spend huge monthly fees, getting locked into unfriendly contracts, and watching shows and movies at specific times were gone. Netflix sparked the cord-cutting trend that gave households a far superior experience.
The growth has been spectacular. Netflix launched streaming roughly 18 years ago in 2007. As of Dec. 31, 2024, it had 302 million subscribers in 190 countries, and rivals are struggling to keep up.
NASDAQ: NFLX
Key Data Points
Pressing play on a trillion
In April, Netflix's internal goals were leaked, and it was revealed that the leadership team set a target to reach a $1 trillion market cap by 2030. As of this writing, the business is worth $528 billion. This type of outlook draws attention.
To help it get to a $1 trillion market cap, Netflix executives believe the business will hit two key financial targets through the rest of the decade. First, they see Netflix's revenue doubling between 2024 and 2030. I imagine this involves continuing to grow the subscriber base. However, this likely will become less of a factor, as the company no longer reports this critical metric. It's also important to increase revenue from advertising, a relatively new focus for Netflix.
On the profitability front, management thinks operating income will triple between 2024 and 2030. To get there, I think Netflix will strategically flex its pricing power to squeeze more juice out of its customer base. This has worked well in developed markets, namely the U.S. and Canada. Investors will find out how accepting emerging countries are to higher prices over time.
If the company's market cap reaches the coveted $1 trillion mark by 2030, Netflix shares will essentially double. That's assuming revenue doubles, as management hopes, and that the stock's price-to-sales multiple (P/S) stays constant at 13.5.
I'm not confident. The stock is very expensive these days. Assuming the P/S reverts to the trailing-10-year average of 7.9, shares would only rise 17% in the next five years. This shows the risk of a less-lucrative outcome for investors.
Given that Netflix is a more mature business these days, I wouldn't be surprised if revenue slows from past gains. I think getting in the $1 trillion club is a much more attainable goal over the next decade, as opposed to management's goal of 2030.
