The Nasdaq-100 index was just lately down by as a lot as 23% from its all-time excessive, inserting it in bear market territory. World commerce tensions, which had been sparked by a collection of tariffs President Donald Trump enacted on imported items from the US’ main buying and selling companions, have rattled the markets. Traders usually trim their publicity to shares throughout unsure conditions and flock to the protection of belongings like money as an alternative.
However not each firm is immediately affected by the simmering commerce struggle since tariffs are usually imposed on bodily imports. Netflix (NFLX 5.36%), as an illustration, sells subscriptions to its streaming platform for entry to motion pictures and TV reveals. As digital merchandise, they have been exempt from the tariffs thus far.
Furthermore, Netflix operates in over 190 international locations so its income base is extraordinarily diversified, which can present some insulation if any governments resolve to penalize digital items. Actually, the corporate launched its monetary outcomes for the primary quarter of 2025 on April 17, and administration did not change its full-year forecast in any respect regardless of the lingering macroeconomic uncertainty.
Netflix inventory is simply down 8.6% from its all-time excessive as of this writing, so it is doing much better than the broad market amid the latest turmoil. This is why buyers with a spare $1,000 — cash they do not want for near-term bills — may need to spend money on Netflix proper now.
Picture supply: Netflix.
Netflix dominates the streaming business
Netflix had 301.6 million paying subscribers on the finish of 2024. The corporate determined to cease reporting these numbers every quarter as a result of it needs buyers to give attention to its monetary metrics as an alternative. However Netflix stays the world’s largest streaming service by far. Amazon Prime is in a distant second place with an estimated 200 million subscribers, and Walt Disney rounds out the highest three with 124.6 million subscribers for Disney+.
Netflix generated a report $10.5 billion in income in the course of the first quarter of 2025, which was up 12.5% from the year-ago interval. That progress fee represented a deceleration from the prior few quarters, nevertheless it truly exceeded administration’s 11% progress forecast due to higher-than-expected income throughout each subscriptions and promoting — the latter of which has grow to be a key level of give attention to Wall Avenue.
The corporate launched a brand new ad-supported subscription tier in late 2022 at a less expensive worth level than its common memberships. For U.S. subscribers, it prices simply $7.99 per 30 days as of this writing, in comparison with $17.99 per 30 days for the usual tier and $24.99 per 30 days for the premium tier. Nonetheless, in contrast to normal and premium subscribers, every ad-tier subscriber may grow to be extra worthwhile over time as companies ramp up their advertising and marketing spending on the platform.
Netflix stated its promoting income doubled in 2024, and it expects an analogous end in 2025. The corporate rolled out its personal ad-technology platform known as Netflix Adverts Suite within the U.S. on April 1, which can ultimately enable companies to measure the efficiency of their advertising and marketing campaigns with a excessive diploma of accuracy, and in addition goal particular audiences. These capabilities will make Netflix a extra enticing vacation spot for advertisers.
Stay programming may gas the subsequent section of progress
The surest approach to develop promoting income is to maintain customers engaged for longer durations of time. The extra time every subscriber spends on Netflix every day, the extra advertisements they’ll see and the more cash the corporate will make. Stay programming is a strong software in that regard as a result of sporting occasions like boxing and soccer can run for a number of hours at a time.
Netflix solely aired each NFL video games dwell on Christmas Day in 2024, attracting about 30 million viewers every, making them essentially the most streamed video games within the sport’s historical past. The typical NFL recreation runs for over three hours, which is longer than what the typical person spends watching Netflix every day (two hours). In different phrases, dwell sports activities have the potential to drive above-average engagement from subscribers, and Netflix plans to indicate each NFL video games on Christmas Day once more in 2025.
Netflix additionally aired the Mike Tyson vs. Jake Paul boxing match in November, which was a raging success. There was a feminine boxing match on the undercard between Katie Taylor and Amanda Serrano, which turned essentially the most watched ladies’s sporting occasion in U.S. historical past. Netflix will host their rematch in July.
The corporate expects to spend a report $18 billion to supply and license content material throughout 2025, which is way over any of its rivals. Nonetheless, it stays the one pure-play streaming platform producing earnings in the mean time, which is a key advantage of its huge scale. That additionally means Netflix is ready to outbid its friends for blockbuster dwell occasions going ahead.
Netflix inventory is not low cost, however its valuation is likely to be justified
Netflix generated $6.61 in earnings per share (EPS) in the course of the first quarter of 2025, which was a 25% enhance from the year-ago interval. With trailing-12-month EPS of $21.16, its inventory trades at a price-to-earnings (P/E) ratio of 49.1.
That is not low cost contemplating the Nasdaq-100 trades at a P/E ratio of 27.2, however Netflix’s valuation is likely to be justified contemplating its unimaginable monitor report and future progress potential. In line with Wall Avenue’s common estimate (offered by Yahoo! Finance), Netflix may develop its EPS to $25.31 this 12 months earlier than reaching $30.15 in 2026, making its P/E ratio seem way more enticing on a forward-looking foundation:
Information by YCharts.
However the largest rewards for buyers shall be realized long run. Netflix estimates its addressable market is value $650 billion throughout streaming subscriptions, promoting, gaming, and extra, and the corporate had solely captured 6% of it on the finish of 2024. Merely put, it has a protracted runway for continued progress.
Though Netflix inventory is down simply 8% from its all-time excessive, this might nonetheless be an awesome alternative for buyers to take a long-term place.
John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Amazon, Netflix, and Walt Disney. The Motley Idiot has a disclosure coverage.
