Meet the Tech Giant Poised for $1 Trillion Success by 2035

Netflix, a well-known streaming service, is showing remarkable growth potential that might push its market cap to the coveted $1 trillion mark by 2035. Consistent growth and new opportunities in the tech space are paving the way for this transition.

In recent years, artificial intelligence (AI) has been a significant force driving growth across various tech companies. Major players like Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Taiwan Semiconductor Manufacturing have successfully integrated AI into their operations, creating strong competitive advantages.

Despite facing challenges, Netflix remains a key player in AI development by leveraging advanced algorithms that enhance user experience through personalized streaming recommendations. Although the company has faced recent scrutiny, it has showcased continued strong growth, reporting a market cap of about $324 billion. Its stock has surged by more than 100% in the past year and a staggering 1,380% over the past decade, indicating a promising future ahead.

Impressive Financial Performance

Netflix's latest financial results have exceeded market expectations, boasting a third-quarter revenue of $9.83 billion, which reflects a 15% year-over-year increase. The earnings per share (EPS) reached $5.40, soaring by 45%. These numbers are largely attributed to a surge in paid subscribers, with an increase of over 5 million, marking a 14% growth. Additionally, Netflix's operating margin expanded significantly, rising by an impressive 720 basis points to 29.6%.

Analysts predicted Netflix would report revenue of $9.77 billion and an EPS of $5.12 while forecasting subscriber gains of only 4.5 million, making the company's performance even more remarkable.

Looking forward, Netflix's management is optimistic about continued growth, forecasting a fourth-quarter revenue of $10.1 billion, an increase of nearly 15%. They anticipate EPS of $4.23, which would see more than double the profits.

Pathways for Future Growth

During the earnings call, Netflix's leadership highlighted three key areas that could boost growth moving forward. First, the company has been keen to expand its presence in the video gaming sector. Interest is growing in games inspired by their original content, particularly those based on popular series like Squid Game.

Secondly, Netflix is venturing into live events. They plan to live-stream high-profile events, including a boxing match featuring Mike Tyson, as well as exclusive rights to two NFL games on Christmas Day. Additionally, they are becoming the new home of WWE Raw, set to premiere in January 2025.

The most significant opportunity for Netflix lies in its burgeoning digital advertising business. Viewers are increasingly engaging with ad-supported subscription tiers, with a remarkable 35% rise in new members opting for the lowest-priced ad tier quarter over quarter. This segment is responsible for 50% of new subscribers in ad-supported regions.

Netflix is focusing on strengthening its advertising strategy, launching a first-party ad server in Canada, with plans to expand further by 2025. The company has partnered with The Trade Desk to enhance its ad reach. Additionally, management expects ad revenue to double in 2025.

These initiatives underscore Netflix's commitment to driving growth in innovative ways.

Road to the $1 Trillion Mark

Currently valued at $323 billion, Netflix would need to witness stock price gains of about 207% to achieve a market cap of $1 trillion. According to industry analysts, Netflix is projected to generate revenue of approximately $38.74 billion in 2024, leading to a forward price-to-sales (P/S) ratio of about 8. For Netflix to support a $1 trillion market cap, it would need to expand its revenue to roughly $357 billion annually.

Analysts forecast that Netflix's revenue will grow at approximately 26% annually over the next five years, paving the way for a potential $1 trillion market cap by 2035. Given Netflix's past performance of increasing its revenue by 562% over the last decade and net income by an extraordinary 1,450%, these projections may be conservative. Netflix has a history of outpacing market expectations, which could accelerate this timeline.

Currently trading at about 39 times earnings might seem high, but it is worth noting that analysts anticipate Netflix will achieve an EPS of $23.11 by 2025, giving a valuation similar to that of the S&P 500 at a multiple of 30. Considering Netflix's consistent growth and substantial opportunities ahead, this offers an attractive long-term investment.

growth, technology, trillion