The Nasdaq Composite (NASDAQINDEX: ^IXIC) has been on an impressive bull market run that began just over three years ago. The accelerating adoption of artificial intelligence (AI), higher corporate earnings, and the ongoing campaign of interest rate cuts have created a perfect storm to sustain the market's momentum. The tech-centric index's three-year rise suggests good things for investors in the coming year.
Since 1975, there have been five bull markets that have lasted longer than three years, and each time the rally beyond past the three-year threshold continued to climb, averaging eight years, with even the shortest one lasting for five years. History suggests the current bull has room to run.
There's also been a renaissance in stock splits. A growing number of investor-favorite stocks are splitting their shares, which is historically preceded by strong operating and financial metrics. As a result, investors are taking a renewed look at these stock-split stocks. One such company is Netflix (NFLX +2.74%). The streaming video stock has surged 932% over the past decade (as of this writing) and 48% over the past year, prompting manangemet to announce a 10-for-1 forward stock split, scheduled for later this month. Evidence suggests the company's impressive run will continue into 2026. Here's why.
Image source: Getty Images.
The leader of the pack
It wasn't terribly long ago that market watchers were making dire predictions about Netflix's future. Streaming competitors, including Disney+, Warner Bros. Discovery, and Peacock by Comcast, were being offered up as "Netflix killers," and investors were justifiably concerned. However, the reality turned out to be much different.
Netflix took more than a decade and an estimated $135 billion to build out its content library, burning cash and amassing debt in order to do so. Many on Wall Street doubted that Netflix would ever be cash flow positive and profitable, and it took more than 10 years to prove the bears wrong.
Rivals thought it would be quick and easy to vanquish Netflix and steal its crown, but conquering the streaming market proved harder than it looked. One by one, Netflix's would-be rivals scaled back their ambitions as pressure from Wall Street and Main Street mounted for these streaming wannabes to focus on profitability.
Catalysts for future growth
A report emerged earlier this year that laid out Netflix's ambitious plans to grow its content library, increase its global expansion, and expand the reach of its ad-supported tier, predicting dramatic results by 2030, according to a report in The Wall Street Journal:
- Double revenue from $39 billion to $78 billion within five years.
- Earn $9 billion in global ad revenue by 2030, up more than fourfold from an estimated $2.15 billion.
- Triple operating income to $30 billion.
- Increase its subscriber count to 410 million, up from roughly 302 million in 2024.
- Earn a $1 trillion market cap by 2030.
While those goals might seem ambitious, Netflix has a track record of proving doubters wrong.
NASDAQ: NFLX
Key Data Points
One example of how the company can achieve these goals stands out. The Netflix original movie KPop Demon Hunters has become nothing short of a global phenomenon. Consider some of the blockbusters' most notable achievements:
- Most-watched Netflix film ever.
- First Netflix film to reach No. 1 at the box office (during its limited release).
- The soundtrack hit No. 1 on the Billboard Hot 100.
- The first soundtrack ever to have four simultaneous songs in the Billboard Hot 100's Top 10.
- The hit song Golden spent six weeks at No.1.
- Sparked a groundbreaking licensing deal with Hasbro and Mattel to create toys and games based on the hit movie.
To be clear, this isn't Netflix's first runaway smash hit. Let's not forget blockbuster fan favorites like Squid Game, Stranger Things, Wednesday, The Witcher, and Bridgerton, which have all spawned multiple seasons, creating opportunities to develop additional revenue streams through product placement, experiences, and merchandising.
The number tell a tale
Netflix's results tell a compelling story. For the third quarter, Netflix generated revenue that increased 17% to $11.5 billion, driving its earnings per share (EPS) up 9% to $5.87; however, the results have an asterisk. The company has an ongoing dispute with Brazilian tax authorities and took a one-time charge of $619 million while the issue plays out. If not for a one-time charge related to a disputed Brazilian tax assessment, profits would have increased by 27%.
Management expects the company's growth spurt to continue. Netflix is guiding for Q4 revenue of $11.96 billion, up 17% and EPS to rise 28% to $5.45.
Wall Street is equally bullish. Analysts' consensus estimates are calling for revenue to grow 15% to $45 billion and EPS to climb 28% to $25.30. Furthermore, Netflix's operating margin continues to expand, and management expects it to surpass 29.3% in 2025, up from 26.7% last year. This illustrates that the company is becoming even more profitable. Finally, the upcoming stock split is expected to increase accessibility for a broader range of investors.
Netflix is currently trading for 34 times next year's expected earnings, which might seem an expensive for a streaming video business. However, the premium valuation is justified by the company's industry-leading position, increasing global audience, ambitious plans for growth, and expanding profitability. This shows why Netflix is well-positioned to continue its winning streak into 2026.
