By 2030, Will Netflix Be Worth a Trillion Dollars?

Bulls in Netflix are holding out for this company to break into the elite 13-figure club.

Netflix (NFLX -1.51%) is unquestionably among the best-performing stocks of the century. In the last 20 years, shares have increased by an astounding 19,320%. For comparison, over the same period, the S&P 500 yielded a total return of 646%.

With a market valuation of $275 billion, this top streaming stock has certainly been a huge winner in the past, making it one of the most valuable firms in the world. Can Netflix, however, grow to be a trillion-dollar company by 2030?

Transforming the Amusement Sector

It’s crucial to first take a broad view and comprehend how Netflix came to be. The early management of the corporation understood that watching video entertainment will be revolutionized by the internet. And this theory turned out to be accurate.

Netflix executives positioned the company to capitalize on the secular trend of streaming. In 2007, the company debuted its service in the United States. At the time, the most common way for homes to watch videos was still through standard cable TV.

But by diversifying its content offerings and breaking into new regions, Netflix was able to increase its subscriber base and revenue very quickly. Furthermore, the company was gaining customers by merely offering a far superior user experience. The days of having limits on what one could see, when they could view it, and how much of it they could watch were long gone.

A Multinational Media Superpower

Netflix is a massive worldwide media company today. In the first half of this year, the business added 17.4 million net new users, bringing its total number of subscribers to 277.7 million across 190 countries. Additionally, Netflix made $36.3 billion in income during the previous 12 months.

The success of the business depends on such scale. Netflix is able to spend a significant amount of money on content—roughly $17 billion this year—because of its enormous user base and income base. Not only is it hard for competitors to spend this much, but it’s much harder to do it profitably. It’s difficult to overestimate Netflix’s first-mover advantage.

This business is incredibly profitable. Executives at Netflix predicted a 26% operating margin in 2024, compared to the company’s 21% operating margin last year. Compared to 2019’s 13% operating margin, that represents a significant improvement and is indicative of a scalable company model.

Furthermore, the business is producing a significant amount of free cash flow, estimated to be $6.9 billion in 2023 and $6 billion this year. The doubters never imagined that this day would arrive. These days, Netflix even buys back its own shares.

Compute the Numbers

Only seven companies are valued at $1 trillion or more as of this writing, and the majority of them are in the internet and technology sectors. The company’s stockholders firmly believe that Netflix fits into this group. It is, after all, a disruptive business that essentially contributed to the emergence of a brand-new sector.

As previously said, Netflix has a $275 billion market valuation at this time. By 2030, the company’s worth would have to increase at a compound annual growth rate of 24% in order to reach $1 trillion. The market capitalization has increased by just 9% annually over the last six years.

I think it’s fair to anticipate a slowdown in investment returns in the upcoming years. This is a result of Netflix not seeing the same rate of growth as it did previously. Furthermore, the stock’s 44.3 price-to-earnings ratio doesn’t exactly scream good value. As such, I do not believe that this stock will be valued at a trillion dollars by the end of the decade.

However, investors who are still confident in the company and who are at ease with the value ought to think about purchasing shares and holding them for the next years.

Is It Time to Put $1,000 Into Netflix?

Think about this before investing in Netflix stock:

Netflix was not one of the ten stocks that the Motley Fool Stock Advisor analysis team recently named as the best ones for investors to purchase right now. In the upcoming years, the ten equities that made the cut might yield enormous profits.

Final Thoughts

Despite its remarkable previous performance and current profitability, Netflix faces enormous obstacles on its path to becoming a trillion-dollar business by 2030. The aim is ambitious, given the needed compound annual growth rate of 24% and the historical increase of only 9% annually over the previous six years. Investors must to carefully consider the company’s potential for future growth as well as its current valuation. Even if Netflix is unable to hit its trillion-dollar milestone, investors who believe the company has significant long-term potential may still see significant gains by sticking onto the shares.