Stepping into the realm of a trillion dollars is like embarking on a journey across the cosmos — vast, unfathomable, and distant.
Imagine counting your way to a trillion – it would take over 30,000 years of non-stop tallying. That’s the sheer magnitude we’re talking about here.
But wait, there are already members in the elite $1 trillion club, and new entrants keep knocking on the door. The question on the table: Can Netflix (NASDAQ: NFLX) secure its spot among these titans?
Image source: Getty Images.
Exploring the Illustrious $1 Trillion Club
Let’s start at the beginning: A company’s stock price multiplied by its outstanding shares gives us the enigmatic figure known as its market capitalization.
Presently, six American behemoths – Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta Platforms – reign over the $1 trillion realm.
There are also 25 other American powerhouses with market caps ranging between $200 billion and $1 trillion, known as megacap stocks. Among them is Netflix.
Unveiling Netflix’s Trillion-Dollar Ambition by 2035
As of now, Netflix boasts a market cap of $280 billion. This number, however, falls short of its historical high. The streaming giant is in the process of resurgence following a tumultuous period in 2021/22, marked by a 76% plunge attributed to declining subscribers. Since mid-2022, Netflix shares have skyrocketed by 246%, nearing their all-time peak of $691.
Yet, cresting a new record high is a far cry from breaching the $1 trillion market cap milestone. Netflix must quadruple its market cap over the next decade and a half to rub shoulders with the trillion-dollar elites.
Is it feasible? Perhaps – but it will be no walk in the park.
If Netflix sustains a compound annual growth rate (CAGR) of 13% for the upcoming 10.5 years, reaching a $1 trillion valuation could be within its grasp. This pace outstrips its performance over the past five years but is not beyond the realm of possibility.
NFLX Market Cap data by YCharts
Netflix’s market cap has grown from $153 billion to $279 billion in the last half-decade, sporting a CAGR of 12.7%. Maintaining this growth pace over the next 10.5 years would propel Netflix’s market cap to $980 billion.
Evaluating the Investment Potential of Netflix
Whether Netflix ascends to a trillion-dollar valuation or not, the paramount consideration for investors remains: Is the stock a viable long-term investment?
Financially, Netflix is in fine fettle. Revenue growth stands at around 15%, with earnings soaring by 79% year over year. Furthermore, free cash flow per share, a critical metric, has surged tenfold over the past five years.
However, there are reservations regarding the stock’s valuation. With a price-to-earnings multiple of 45x, Netflix trades significantly above the S&P 500’s average.
For investors with a long-term outlook, Netflix warrants consideration. Down the road, there could be a plethora of reasons – perhaps a trillion of them – to have this stock in your portfolio.
Thinking of Investing in Netflix?
Before diving into Netflix’s shares, ponder this:
The Motley Fool Stock Advisor team recently flagged what they deem the 10 best stocks to invest in right now… and Netflix did not make the cut. The selected 10 equities are primed for substantial returns in the years ahead.