The calendar quarter just ended. And with the start of October here, companies are getting ready to provide investors with a fresh set of financials, giving the market valuable insights into their operations. Netflix (NFLX +0.61%) is usually early to report its numbers, with its earnings call scheduled later in the month of October.
Netflix continues to have a lot of momentum on its side. And it has been a wildly successful investment in the past. Should you buy this top streaming stock before its Q3 earnings update is revealed on Oct. 21?
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Beating Wall Street estimates
Netflix shares have crushed the market in the past. Over the last decade, shares have soared nearly 1,000% (as of Oct. 2). The gains have continued recently, as the stock is up 30% in 2025 (at the time of this writing).
It's usual that for shares to perform so well, the underlying business reports financial results that come up well ahead of expectations. This is precisely what Netflix has done. When the company reported Q1 and Q2 results, it beat Wall Street estimates on both the top and bottom lines.
And for the three-month period that ended Sept. 30, the sell-side analyst community expects Netflix to report revenue of $11.5 billion and diluted earnings per share (EPS) of $6.95. These projections are roughly in line with what Netflix's leadership team is forecasting. Executives think sales and diluted EPS will grow 17.3% and 27.2%, respectively, in the third quarter.
If the company outperforms, there is a very strong likelihood that the stock will pop. Even better, a favorable outlook for Q4 to wrap up the year would certainly drive even more bullish fever. Should this happen, it would be a smart move to buy shares today.
NASDAQ: NFLX
Key Data Points
Always focus on the long term
Regardless of the view you have on Netflix's third quarter financials, no one has any idea how the market will react. In the short term, sentiment is the biggest factor moving share prices. And there's no way to accurately predict what the market's mood will be at any given point in time.
While it can certainly be exciting to make an investment decision based on an upcoming event, with the goal of generating a quick profit, investors should really be thinking about this situation with a long-term time horizon. In other words, only look to buy Netflix shares with a perspective that's fixed on the next five or 10 years. This will force you to consider the factors that are most important, which are the fundamentals of the business.
Based on Netflix's ongoing success, investors can confidently say that the company will likely have more subscribers, as well as higher revenue and earnings, in the future. That's a very encouraging perspective to have. And it's not a wild assumption, especially with proven pricing power, the impressive adoption of the ad-supported tier, strong free cash flow generation, and a fruitful entry into live events.
However, the market has lofty expectations, as shown by the valuation. Shares currently trade at a price-to-earnings (P/E) ratio of 49.5, which is certainly expensive any way you look at it. Of course, a clear argument can be made that Netflix is deserving of such a high P/E multiple. It has a large and engaged global audience, massive scale to invest in fresh content, a powerful brand name, and robust financial performance. It's hard to be pessimistic, even though a reasonable perspective is that returns going forward might disappoint.
In my view, the stock is too rich to put new capital to work. However, if investors have a desire to own the best companies in the world, then I can understand why buying shares today is the move. Just make sure you're making a decision that's based on looking well beyond the Oct. 21 financial update.
