Is Netflix Stock Your Ticket to Becoming a Millionaire?
Key Points
- With more than 300 million subscribers worldwide, Netflix cemented itself as a streaming leader.
- The business reached impressive scale that allows it to produce sizable profits.
- Netflix stock has been a monster winner, but the current setup isn’t favorable for new investors.
- 10 stocks we like better than Netflix ›
From shipping DVDs by mail to becoming a worldwide entertainment juggernaut, the rise of Netflix (NASDAQ: NFLX) is worth studying. The business is a disruptive and innovative category creator. It has taken care of investors, with shares soaring 54,700% in the past two decades.
This means that had you invested just $1,900 in this streaming stock in July 2005, you'd have $1 million today. But is Netflix your ticket to becoming a millionaire one day in the future?
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
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Netflix has become a global entertainment icon
At the end of 2024, Netflix counted a whopping 302 million subscribers. That figure was up 81% from the 167 million reported at the end of 2019. Despite a global pandemic, supply chain bottlenecks, inflationary pressures, higher interest rates, and ongoing geopolitical and macro uncertainty, the business found tremendous success.
This momentum continued into 2025, with first-quarter revenue increasing 12.5% year over year. To keep growing, Netflix is expanding further into international markets, such as Asia and Africa. In the U.S. and Canada, more mature markets where the opportunity isn't so big anymore, the business leaned on occasional price increases to keep the ball rolling.
What's more, management is doing things that it previously shunned. Netflix introduced a successful ad-based subscription tier to attract price-sensitive consumers. It also put a stop to accounts that were sharing passwords. Netflix is even stepping into live sports. These pivots showcase strategic nimbleness.
The company's profitability is worth focusing on. After posting a stellar operating margin of 27% in 2024, the executive team predicts that Netflix will report a 29% margin this year. This highlights the scalability of the business model. Higher revenue leads to an improving bottom line, as Netflix's main expenses aren't growing at the same rate as the top line.
Looking at the rest of the streaming industry, it's clear that Netflix stands out. The company's biggest rival, Disney, forecasts a 10% operating margin for its Entertainment streaming segment (Disney and Hulu) in fiscal 2026. Netflix achieved this figure in 2018. It's well ahead in streaming, giving it the financial resources to invest in bolstering its content offerings.
Expectations are high, but for a good reason
This business has become a dominant force in the media and entertainment landscape. It deserves credit for disrupting the legacy cable networks by leaning on expanding broadband internet penetration and its technology prowess to provide a better service to viewers. But the market is fully aware of Netflix's investment merits. As a result, expectations are high, as investors view the business in a very favorable light.
This is clear when looking at Netflix's valuation. Shares trade at a price-to-earnings (P/E) ratio of 60.5. That's not cheap at all. In fact, it's more than double the multiple of the overall S&P 500 index.
To be fair, though, I believe it's totally reasonable for the business to register double-digit earnings per share (EPS) growth on an annual basis for the foreseeable future. Wall Street agrees, as analyst consensus estimates call for EPS to increase at a compound annual rate of 23.6% between 2024 and 2027.
The prediction for Netflix's bottom-line trajectory is impressive. However, I don't think it automatically makes the stock a smart buy. The valuation is too steep, creating a headwind for prospective investors. Don't be surprised if the P/E ratio is lower five years from now.
This means that Netflix likely isn't going to make you a millionaire. While the stock was undoubtedly able to generate monster wealth in the past for its longtime shareholders, the opportunity to achieve incredible returns going forward is limited.
Should you invest $1,000 in Netflix right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.
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