Up Nearly 90% in a Year: Is Netflix Stock Still Worth Buying?
47min read Netflix (NFLX) has been a standout performer in 2024-2025, with its stock surging nearly 99% year-to-date (YTD) from $550.64 in April -2024 to a closing price of $1,096.87 in April 2025. This meteoric rise has left investors wondering: Has the streaming giant already priced in its best days, or does it still hold promise for new buyers?
Netflix’s Recent Performance: A Story of Resilience and Growth
Netflix’s stock has weathered significant volatility, including a dip to $687.05 in October 2024, before rebounding sharply. Its Q1 2025 earnings report underscored this resilience:
- Revenue hit $10.54 billion, a 13% year-over-year (YoY) increase, driven by subscription price hikes and early gains from its ad-supported tier.
- EPS rose to $6.61, far exceeding estimates, with net income jumping to $2.89 billion—up 24% YoY.
- Operating margins expanded to 31.7%, reflecting cost discipline.
The company also announced plans to double its ad revenue in 2025 and guided for 15% revenue growth in Q2, projecting full-year revenue between $43.5 billion and $44.5 billion.
Valuation: A Premium for Growth?
Netflix’s trailing P/E ratio of 46.7x (based on a TTM EPS of $21.15) is significantly higher than the industry average of ~25x, raising concerns about overvaluation. However, its forward P/E of 36.9x—based on 2025 EPS estimates of $25.46—suggests the market is pricing in continued growth.
Investors must weigh this premium against Netflix’s financial health:
- Free cash flow of $7.45 billion TTM, up 19% YoY, supports its content investments and buybacks.
- Debt reduced by $800 million, with $13.6 billion remaining in its buyback program.
Risks and Challenges Ahead
- Content Costs: Netflix spent $14.3 billion on content in 2024, and rising production costs (e.g., live sports deals) could pressure margins.
- Competitive Landscape: Rivals like Disney+ and HBO Max are poaching subscribers, while regional players (e.g., Disney+ Hotstar in India) threaten Netflix’s dominance.
- Subscriber Growth: Though global subscribers hit 301.6 million in 2024 (+16% YoY), Netflix’s decision to stop reporting quarterly subscriber data—citing a focus on revenue—has fueled skepticism about slowing momentum.
The Case for Caution—and Opportunity
Netflix’s stock may look expensive, but its fundamentals remain robust. The company’s shift to ad revenue and pricing power (e.g., U.S. standard plans now at $17.99/month) could offset subscriber stagnation. Its TTM revenue growth of 15% and net income margin of 23.1% suggest it’s executing its strategy effectively.
However, the high valuation means growth must continue. If Netflix fails to meet its 2025 revenue targets or faces significant margin declines, the stock could correct.
Conclusion: A Buy for Growth Investors, but Beware the Risks
Netflix’s stock has delivered staggering returns over the past year, but its valuation demands sustained outperformance. Key metrics to watch include:
- Ad revenue expansion: Will its in-house ad platform meet the $1 billion annual goal?
- Margin stability: Can operating margins stay above 30% amid rising costs?
- Competitor dynamics: How will Disney+, Apple TV+, and regional rivals affect market share?
For investors willing to bet on Netflix’s long-term dominance in streaming and its ability to monetize ad-driven growth, the stock may still be worth buying—but only at a discount to current levels. At its current price, the stock’s premium leaves little room for error.
In a sector where content is king and competition is fierce, Netflix’s future hinges on execution. Until valuation concerns are addressed, it’s a high-risk, high-reward play for those who believe in its vision.
