To The Moon

From Streaming to Stacking Gains: Netflix’s Next Big Move

As I sip my tea and ponder Netflix’s remarkable evolution, it’s clear that the streaming giant has rewritten the rules of entertainment—and now, it’s doing the same for its financial future. What started as a DVD rental service has grown into a global content juggernaut, and its latest strategic pivots suggest there’s still a compelling investment case for $Netflix(NFLX)$. The real question: Is Netflix still a buy, or has its growth story already played out? Let’s dive into the numbers.

Streaming evolution: Netflix rewrites its financial and entertainment playbook

The Ad-Supported Masterstroke: A Revenue Game Changer

Netflix’s foray into ad-supported streaming has been a masterclass in reinvention. While many assumed viewers wouldn’t tolerate ads interrupting their ‘Bridgerton’ binges, adoption has exceeded expectations. In fact, ad-tier subscriptions now make up over half of new sign-ups—an impressive feat that signals a seismic shift in Netflix’s revenue model.

This isn’t just about diversifying revenue; it’s about doubling down on profitability. By tapping into the lucrative digital ad market, Netflix is no longer solely reliant on subscriber fees. The impact is already showing: its profit margin has climbed to 22.3%, up from 16.0% in 2023. Combine that with a pre-tax return on equity of 40.3%, and $Netflix(NFLX)$ is proving it can be both a growth stock and a cash-generating powerhouse.

Netflix’s evolving revenue streams underscore the power of strategic diversification

The Financials: A Deeper Look at the Numbers

Let’s talk figures. Netflix’s latest financials paint a picture of a company hitting its stride:

Netflix’s earnings power levels up—ad-supported strategy fuels profitability surge

• Market Cap: $397.8 billion

• PE Ratio (TTM): 46.94 (expected to drop to 37.83 in 2025 and 31.35 in 2026)

• EPS (TTM): 19.81

• 1-Year Target Price: $1,071.74 (a potential 12.8% upside from its current levels)

• Gross Margin: 46.1% (up from 41.5% in 2023)

• Operating Margin: 26.7% (up from 20.6% in 2023)

• Profit Margin: 22.3% (up from 16.0% in 2023)

For a company often criticised for its high valuation, Netflix’s declining forward P/E ratio (from 46.9 in 2024 to 26.5 by 2027) suggests it’s growing into its earnings rather than relying on hype. And let’s not forget free cash flow, which has surged thanks to disciplined content spending and smarter licensing deals.

Global Storytelling: Netflix’s Secret Cost Advantage

Here’s something investors might not fully appreciate: Netflix’s global content strategy isn’t just about diversifying its audience—it’s about cost efficiency. Rather than relying on expensive Hollywood blockbusters, $Netflix(NFLX)$ has leaned into international storytelling, producing critically acclaimed hits from Korea, Spain, and India at a fraction of the cost of a traditional U.S. production.

The result? Stronger subscriber retention and higher ROI per dollar spent on content. With a working capital ratio of 2.44 and declining capital expenditures (down to 0.78 per share), Netflix is proving that quality content doesn’t have to come with a Hollywood price tag.

The Hidden Growth Driver: Live Entertainment & Sports

Another under-the-radar development is Netflix’s growing investment in live programming and sports. From WWE Raw to high-profile boxing matches, Netflix is expanding beyond on-demand streaming into real-time events—an untapped market that could fuel its next growth phase.

Why does this matter? Live entertainment unlocks higher ad revenue potential and attracts a demographic that’s historically preferred cable TV or competitors like ESPN. With sports broadcasting rights becoming a key battlefield in the streaming wars, Netflix’s entry into this space is a strategic hedge against subscription fatigue.

From storytelling to stock growth—Netflix’s data-driven dominance expands

The Verdict: Is Netflix a Buy?

With its stock trading at $950, below its 52-week high of $1,064, and a 1-year target of $1,071, there’s room for upside. The company’s forward PEG ratio of 1.93 suggests a fair balance between growth and valuation, and its move toward free cash flow generation signals a more mature, shareholder-friendly Netflix.

Risks remain, of course—competition is fierce, and streaming profitability isn’t guaranteed. But with an expanding ad business, a global content advantage, and new live programming revenue streams, Netflix is no longer just a disruptor; it’s an industry leader that continues to evolve.

For investors looking to add some entertainment to their portfolio—without the drama of excessive volatility—$Netflix(NFLX)$ might just be the next blockbuster investment worth watching.

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