Netflix's Meteoric Rise: Can it Reach $1 Trillion by 2035?

In recent decades, the stock market has experienced a remarkable surge, with numerous companies achieving trillion-dollar valuations. Among these elite companies is one industry leader that has rapidly climbed the ranks and deserves consideration as a potential new entrant to the trillion-dollar club. This article explores whether this unstoppable stock can join Apple, Microsoft, Nvidia, Amazon, Alphabet, and Meta Platforms in reaching $1 trillion by 2035.

A Category Leader: Netflix's Unparalleled Growth

Netflix is undoubtedly one of the most successful companies of the past two decades, with its shares increasing an astonishing 66,600% higher since its inception. This remarkable growth is a direct result of the company's innovative approach to disrupting the traditional media market. By focusing on delivering a better experience than cable TV, Netflix has created the streaming industry as we know it today. The company's commitment to innovation and customer satisfaction has led to an impressive track record of growth.

Unmatched Scale and Profitability

Five years ago, Netflix boasted 167 million customers; today, that number has skyrocketed to 302 million, with a presence in 190 countries. Revenue has followed suit, rising from $20 billion in 2019 to $39 billion last year. Even at its current size, the business is exploring new ways to maintain growth, such as introducing an ad-based tier and expanding into live events and sports. Netflix's profitability is also noteworthy, with a massive scale that puts it ahead of its industry rivals.

Getting to $1 Trillion: A Realistic Target?

While reaching $1 trillion may seem ambitious, the market cap only needs to rise 160% in the next decade to achieve this milestone. Considering Netflix's past performance, which has seen its market cap climb by 1,320% over the same period, it's reasonable to expect a slowdown. However, valuation also plays a significant role in determining whether Netflix can reach $1 trillion.

Valuation Matters: A Steep Price-to-Earnings Ratio

The current price-to-earnings ratio (P/E) of 45.3 may seem steep, even with the shares trading 15% off their all-time high from February. This valuation gives investors zero margin of safety, as Netflix must exceed already lofty expectations embedded in the stock price for investors to achieve a satisfactory result.

Should You Invest in Netflix?

While Netflix is undoubtedly on a clear path to reaching $1 trillion by 2035, investors should not consider this as an automatic buy. The valuation is too high, and the company's shares may be overpriced even with its impressive growth record. As such, it's essential to wait for a better valuation before investing in Netflix.

Conclusion

In conclusion, Netflix's meteoric rise has made it one of the most successful companies of the past two decades. With an unmatched scale and profitability, the business is well-positioned to continue growing. However, investors should exercise caution due to the steep price-to-earnings ratio, which gives them zero margin of safety. To reach $1 trillion by 2035, Netflix must exceed already lofty expectations embedded in the stock price. As such, it's essential to wait for a better valuation before investing in this unstoppable stock.

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