All investors want to find businesses early on that eventually become extremely valuable in the future.
A lot of attention goes to companies that have exceeded a $1 trillion valuation, due to how dominant they've become, and the shareholder returns they've produced. The exclusive trillion-dollar club contains just 11 companies (as of Sept. 4) right now. But the group is poised to add more members over time.
There's one booming stock, which has soared 1,140% in the past decade, that has a real shot to reach a $1 trillion market cap by 2035.
Here's what investors need to know.
Remarkable past success
There aren't many success stories in corporate history that can outshine Netflix (NFLX 10.00%). The business deserves credit for having completely upended how households consume video content. Instead of having to watch TVs or movies at certain times of the day, while paying a hefty monthly fee, Netflix gave consumers a much better experience. People could watch what they want, when they want, all at a lower price point.
This disruptive strategy has led to tremendous success. Netflix ended 2024 with 302 million total subscribers. That has driven huge revenue gains. In recent years, growth has been supported by a very successful ad-based subscription tier, as well as live events.
The company has a highly regarded brand name in the industry, so much so that Netflix is often used as a verb. And its scale is a key contributor to the financial performance. Netflix can spend significantly on content, but it's still extremely profitable. The leadership team expects to post an operating margin of about 30% in 2025 (at current foreign exchange rates), with free cash flow coming in between $8 billion and $8.5 billion.
Netflix's story is far from over. Its success is set to continue. And in 10 years, the company should be valued at $1 trillion.
Strong momentum
Netflix has become a dominant force in the media and entertainment world. The momentum keeps up to this day. Revenue soared 16% year over year in Q2 (ended June 30). And the leadership team upped their guidance, showcasing confidence, with revenue expectations of $45 billion (at the midpoint) for fiscal 2025.
These impressive results are happening in a crowded market. Competition for viewer attention is incredibly fierce these days. Netflix not only has to go up against its direct peers, like Walt Disney's Disney+ and Hulu, Warner Bros Discovery's HBO Max, Amazon Prime Video, and Alphabet's YouTube, but there are also other activities that people can choose to do in their free time.
But looking out 10 years to 2035, it's difficult to envision a scenario where Netflix isn't a much bigger business. The streaming platform might be ubiquitous in the U.S. and Canada, but there is a lot of opportunity to expand in other regions, like Latin America, Africa, and Asia.
NASDAQ: NFLX
Key Data Points
One critical factor
As of Sept. 4, Netflix sports a market cap of $534 billion. For the sake of simplicity, let's just say that the market cap would need to double in 10 years to hit the $1 trillion mark. This implies a 7% annualized gain. Based on the company's historical trajectory, this outcome seems very reasonable. In the past decade, Netflix's market cap has skyrocketed 1,140%.
Investors who are more bullish might be wondering if the business can get into the trillion-dollar club a lot sooner. While that's a possibility, Netflix faces one major hurdle to higher stock gains. Its valuation looks steep these days. Shares trade at a price-to-earnings ratio of 53.6, a multiple that has expanded by 167% just in the past three years.
The market has become overly enthused with Netflix's success. Nonetheless, investors shouldn't be surprised to see Netflix joining the $1 trillion club by 2035.
