Record Subscriber Growth Maintains Netflix Bull Run Toward $1,000

Netflix (NFLX) Q4 results published earlier this week were shocking, in the best possible way.

The streaming giant exceeded Wall Street’s expectations on both top and bottom lines, but more importantly, it showed accelerating growth, highlighted by a record number of new subscribers. Now boasting over 300 million total customers, Netflix is fully leveraging the massive economies of scale at its disposal to create a positive feedback loop whereby customer growth allows the tech platform to secure more funding for more shows and ultimately secure more subscribers. A virtuous circle of sorts.

This multiplier effect drives operating margins higher and sustains the stock’s bullish momentum despite some analysts suggesting the stock is overbought. Thus, despite concerns over what may seem to be an inflated valuation following its 93.8% rally over the past year and 146% since 2022, I don’t see bullish sentiment for NFLX stock fading any time soon.

Accelerated Revenue Driven by Record Subscriber Growth

Netflix sustained yet another quarter of double-digit growth in memberships and revenue in Q4, igniting investor enthusiasm. Memberships grew 15.9% year-over-year, while revenue grew by 16%, a significant acceleration compared to previous quarters.

These figures are particularly impressive as we traverse an increasingly saturated streaming market, where growth can be problematic. Nevertheless, Netflix’s ability to continue adding subscribers at an accelerated rate speaks volumes about the company’s management.

Speaking of management, in its post-earnings call, NFLX mentioned that Q4 growth was fueled by its full content lineup, including the record-breaking “Squid Game” second season and the Jake Paul vs. Mike Tyson fight. While these high-profile events added subscribers, management highlighted that the platform’s broad content offering played a much more significant role. If you read between the lines, this could ease concerns on Wall Street about the sustainability of quarterly outperformance. The key takeaway is that Netflix is confident in retaining subscribers who paid to watch a specific event. NFLX’s content strategy delivers sustained engagement, key for consistent revenue growth​.

Another noteworthy revenue driver for Netflix is its expanding ad business. Netflix’s ad-supported plan has grown rapidly, with 55% of new subscribers in ad-supported countries opting for the cheaper tier. This trend validates management’s accurate prediction from a year ago of a growing appetite for budget-friendly streaming options. Netflix is now positioned to capture this market niche, as no other streaming service offers a comparative service with as extensive and cost-effective a content catalog as NFLX. To further boost investor confidence, management indicated that the ad business is expected to expand rapidly, doubling revenue in 2025​.

NFLX’s Virtuous Growth Cycle Fuels Bullish Momentum

Looking ahead, Netflix expects its revenue growth to remain strong, projecting 11% growth for Q1 2025. Netflix’s management has attributed its healthy growth expectations to the continued expansion of its subscriber base, ongoing investments in content, and the growing ad business, which, as I just mentioned, is likely to have a strong year.

It was also interesting to hear how management sees the company’s long-term potential, noting that despite the high levels of competition, the streaming market is still in its early stages. With over 700 million broadband households globally and the cord-cutter generation seeking alternative forms of media, management believes there is significant room for growth.

Can Netflix Stock Keep Rising?

Regarding whether Netflix stock can continue climbing after such a remarkable rally, especially with its post-earnings surge, investors should focus on its capacity to scale its margins efficiently. This was evident in Q4, where scaling enabled it to achieve impressive operating margins. For the quarter, Netflix’s operating income soared by 52% year-over-year, with operating margins reaching 22%, up from 17% a year ago. In 2024, the company’s operating margin peaked at 26.7%, propelling a 66% increase in EPS.

If that wasn’t enough, analysts predict EPS will grow 23% in 2025 to $24.46, outpacing revenue growth and sustaining Netflix’s broader narrative that streaming is the future while traditional forms of media such as TV regress into insignificance.

Sustained margin expansion is crucial in supporting Netflix’s elevated valuation and is a key indicator watched by analysts and investors alike. Indeed, NFLX’s somewhat elevated P/E ratio of 48.6 is based on this year’s expected earnings. Nevertheless, this multiple is reasonable given the steaming giant’s uncanny ability to maintain strong margins and growth trajectory. As Netflix continues flexing its pricing-power muscles and growing its subscriber base, its bullish momentum will likely persist.

Is Netflix a Buy, Sell, or Hold?

Wall Street analysts are highly optimistic following NFLX’s Q4 report. The global streaming giant now boasts 20 Buy, seven Hold, and two Sell ratings over the past three months, forming a Moderate Buy consensus on Wall Street. Moreover, NFLX stock carries an average price target of $986.46, which implies a modest 3.4% upside potential from current price levels.

See more NFLX analyst ratings

Economies of Scale Set to Push NFLX Above $1,000

In summary, Netflix’s aggressive business model, novel marketing, and economies of scale are getting the job done for the world’s leading content streamer. As expected by most analysts, Netflix posted more positive results confirming its margin resilience, which warrants further bullish sentiment despite the near $1,000 per share stock price. Also, the company confirmed its trajectory of sustained growth driven by savvy content investments, a rapidly growing ad business, and efficient scaling of operations.

With accelerating revenue, record subscriber growth, and stable margins, Netflix is set to breach its $1,000 share price barrier later this year.

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