Should You Invest in Netflix Stock After Recent Split?
Netflix recently executed a 10-for-1 stock split, a strategic move aimed at enhancing its accessibility for investors. This event occurred during a period of remarkable growth for the streaming leader, as the company’s market capitalization remained around $450 billion, with share prices returning near the $100 mark post-split. Investors are now faced with the pressing question: should you invest in Netflix stock after the recent split?
Netflix’s Impressive Growth Metrics
In the second quarter of 2025, Netflix achieved a 16% increase in revenue year over year. This momentum continued into the third quarter, where the company reported a 17% revenue growth. The rise in paid memberships and pricing, alongside a burgeoning advertising segment, contributed to these positive outcomes.
Operating Margins and Profitability
Despite some fluctuations, Netflix maintained robust profitability. The third quarter’s operating margin stood at 28%, slightly lower than 34% observed in the second quarter. This decrease was primarily attributed to a one-time Brazilian tax charge. Without this charge, Netflix would have surpassed its operating income forecasts.
Looking forward, management projects an expansion of the operating margin for the full year, anticipating it will reach 28%, up from 27% the previous year.
Future Outlook and Content Plans
Netflix is gearing up for a strong finish in 2025, fueled by highly anticipated releases. The final season of “Stranger Things” and new seasons of other popular series are set to attract more viewers, enhancing the platform’s appeal to both subscribers and advertisers.
Management is optimistic, expecting approximately 17% revenue growth year-over-year in Q4. Additionally, Netflix is projected to generate around $9 billion in free cash flow for the entire year, despite ongoing investments in content and advertising technology.
Valuation Considerations After the Split
The recent stock split does not alter the intrinsic value of Netflix. With a current share price slightly above $100, the company’s valuation remains high. Key financial metrics include:
- Market Cap: $463 billion
- Price to Earnings Ratio: 44 times earnings
- Price to Sales Ratio: 10 times sales
- Gross Margin: 48.02%
Comparative Valuations
When compared to traditional rivals like Walt Disney and Comcast, Netflix’s valuation stands out. These competitors trade at lower valuation multiples, but do not exhibit the same growth rate or profitability as Netflix. This disparity explains why investors are willing to pay a premium for Netflix shares.
Investment Considerations
While Netflix exhibits strong business fundamentals, its high valuation presents inherent risks. Any potential investment should consider these factors carefully. Shares may appear moderately attractive, but investors should approach with caution given the competitive market landscape.
In summary, after analyzing Netflix’s stock split, solid growth metrics, and competitive positioning, it’s crucial to weigh the potential risks before deciding to invest. Keeping a diversified portfolio should remain a priority in navigating investment choices in the streaming sector.
