[Reuters Breakingviews] Netflix’s $1 trln goal is an early-season callback

NEW YORK, April 21 (Reuters Breakingviews) - Netflix NFLX.O has a fitting finale in mind for its journey to media dominance: joining the 13-figure club. The video streaming service is targeting a $1 trillion valuation by 2030 with plans to double its revenue. Even hitting that lofty target would imply a premium not seen for years, when growth was scorching. The callback to an earlier narrative might be tough to pull off.

Achieving its goal would mean that the company co-led by Ted Sarandos would nearly triple its market value and increase its topline to $78 billion in five years, the Wall Street Journal reported, citing an internal management meeting. The streaming giant also wants operating profit to triple from last year’s over-$10 billion in the same time frame. Currently, analysts are penciling in roughly $70 billion in revenue and $29 billion in operating income in 2030, according to Visible Alpha.

Sarandos has some handy tools with which to beat Wall Street’s benchmarks. On Thursday, Netflix reported that first-quarter revenue rose 13% year-over-year to more than $10 billion and that it expects second-quarter growth to reach 15%, roughly the compound rate needed to meet its goal. Its cheaper advertising-supported tier can nab yet more subscribers and gather more revenue from commercials, pegged at a $9 billion opportunity by 2030, according to the WSJ report. Its stock has outperformed the major technology stocks against which it is so often compared since President Donald Trump took office.

Assuming Netflix goes all the way, an enterprise value of $1 trillion — including roughly $7 billion in net debt — would be nearly 13 times its sales target. That’s twice its multiple today and well above its 10-year average of 7 times. And while a 13-figure sum would be within recent norms if measured against operating profit, the 2030 plan implies an operating margin of 40%, well above today’s 32% even as rival YouTube is ascendant and advertising and sports rights pushes remain nascent.

The last time Netflix notched an enterprise-value-to-sales multiple even close to its outlook was in 2018. For the six years prior, revenue increased at a compound annual growth rate of 28%, substantially higher than today. To boot, the company has stopped disclosing subscriber numbers, a classic move for a maturing business: Apple, for instance, ceased reporting the number of iPhones sold in 2018. It has kept aloft since because, as smartphone sales growth tailed off, it began pushing more services, including advertising – a tricky endeavor that has ensnared it in antitrust woes. Netflix has a no less difficult pivot ahead of it on the way to the $1 trillion club.

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CONTEXT NEWS

Netflix said on April 17 that its revenue in the first quarter increased 13% year-over-year to nearly $11 billion. Its operating profit margin jumped to 31.7% compared to 28.1% in the same quarter in 2024.

Netflix believes it can hit a market value of $1 trillion, while doubling its revenue and tripling its operating income by 2030 as compared to results for 2024, the Wall Street Journal reported on April 14.

During an earnings call on April 17, co-Chief Executive Ted Sarandos said that, while the company has internal meetings about long term aspirations, “it's important to note that this is not the same as forecast.”

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