Because it final cut up its inventory again in 2015, shares of Netflix(NASDAQ: NFLX) have surged on the again of unimaginable enterprise development and elevated confidence within the firm’s long-term funding thesis. This investor optimism has made the inventory a Wall Road darling, placing shares properly past $1,000 — a stage that makes a inventory cut up wise. To this finish, the corporate just lately introduced it’s splitting its inventory 10-for-1.
The streaming service firm says the cut up is about accessibility, particularly for workers who take part within the firm’s inventory choice program. Nonetheless, it is a seminal second for the inventory and shareholders — particularly contemplating the curler coaster shareholders have been on lately. Capturing the inventory’s wild volatility throughout this era, shares traded at ranges beneath $200 as just lately as 2022 — a far cry from at the moment’s ranges.
With shares set to start buying and selling on a split-adjusted foundation tomorrow, it is a good time to have a look at the inventory. Is it a purchase, even after the cut up?
Picture supply: Netflix.
Pushed by a mixture of worth hikes, membership development, and elevated promoting income, Netflix’s third-quarter income rose 17.2% yr over yr — an uptick from 15.9% development within the second quarter and above the corporate’s 15.7% top-line development in 2024. Administration additionally guided to a different 17% improve for the fourth quarter, which suggests the reacceleration is holding into yr’s finish.
Key to the corporate’s development story is its promoting enterprise. Whereas this a part of Netflix’s operation is lower than three years previous and remains to be small relative to its subscription enterprise, it’s scaling quick.
“We have now a stable basis and are more and more assured within the outlook for our adverts enterprise,” administration mentioned within the firm’s third-quarter replace. “We at the moment are on observe to greater than double our adverts income in 2025…”
That issues as a result of adverts can widen Netflix’s development runway with out relying solely on new subscribers and worth hikes. And since promoting economics could be enticing, the fast-growing enterprise will doubtless bolster income meaningfully over time.
Even earlier than the promoting enterprise turns into a considerable portion of general income, Netflix’s core enterprise is already driving working margin growth. The corporate’s 2024 working margin was 27%, up from 16% in 2023. And administration expects its 2025 working margin to broaden to 29%.
Notably, the inventory cut up would not change the enterprise or the corporate’s worth. It simply offers Netflix traders 10 shares with a complete worth of what one share was value earlier than the cut up. Traders, due to this fact, should not purchase the inventory due to the cut up; it is only a matter of optics.
Nonetheless, given the inventory’s massive run-up over the previous few years, it is a good time to have a look at the inventory. Clearly, the enterprise is firing on all cylinders. However are shares priced attractively?
As of this writing, Netflix trades at a price-to-earnings ratio of greater than 47. Whereas this will likely appear stretched, traders ought to do not forget that the corporate’s double-digit income development and working margin is anticipated to drive vital earnings development over the subsequent yr. Because of this, the corporate’s price-to-forward earnings ratio could also be a simpler method to perceive the inventory’s valuation within the correct context. Netflix’s ahead P/E ratio sits at 35 — a way more affordable (and even enticing) determine in gentle of the corporate’s market management and up to date development traits. And remember about Netflix’s fast-growing promoting enterprise, which might morph into a serious earnings development lever over the subsequent 5 to 10 years.
So, is Netflix inventory a purchase — even after a inventory cut up? I feel so. In fact, no inventory is with out dangers. The competitors within the area is intense, that includes deep-pocketed tech firms with huge funds accessible for content material spending. Because of this, I would preserve any place within the inventory small. Moreover, traders who determine to purchase shares ought to preserve a watchful eye on the aggressive nature of the streaming enterprise to see if any future developments change the funding thesis.
Before you purchase inventory in Netflix, think about this:
The Motley Idiot Inventory Advisor analyst crew simply recognized what they imagine are the 10 greatest shares for traders to purchase now… and Netflix wasn’t one among them. The ten shares that made the reduce might produce monster returns within the coming years.
Think about when Netflix made this record on December 17, 2004… for those who invested $1,000 on the time of our suggestion, you’d have $599,784!* Or when Nvidia made this record on April 15, 2005… for those who invested $1,000 on the time of our suggestion, you’d have $1,165,716!*
Now, it’s value noting Inventory Advisor’s whole common return is 1,035% — a market-crushing outperformance in comparison with 191% for the S&P 500. Do not miss the newest high 10 record, accessible with Inventory Advisor, and be part of an investing neighborhood constructed by particular person traders for particular person traders.
*Inventory Advisor returns as of November 10, 2025
Daniel Sparks and his shoppers haven’t any place in any of the shares talked about. The Motley Idiot has positions in and recommends Netflix. The Motley Idiot has a disclosure coverage.
Spotify (SPOT) shares rose in early premarket buying and selling on Tuesday after the audio big reported stronger-than-expected third-quarter outcomes,…
