Netflix stock split launches as profits soar 29%

Netflix shares began trading on a split-adjusted basis on Nov. 17, marking the streaming giant’s first stock split in a decade as the company experiences accelerating growth across multiple revenue streams.

The 10-for-1 split reduces Netflix’s share price from over $1,000 to more accessible levels for employees and smaller investors. The move doesn’t alter the company’s overall valuation but divides existing shares into 10 new shares at a proportionally lower price.

Making shares more accessible

Netflix last implemented a stock split in 2015, and shares have climbed substantially since then on strong business performance and investor confidence. The company stated that the primary goal of the split is improving accessibility, particularly benefiting employees who participate in its stock option program.

The timing coincides with remarkable business momentum. Netflix’s market capitalization stands at $471.3 billion, and year-to-date shares have gained 25.42%. The stock’s journey has included extreme volatility, trading below $200 as recently as 2022 before rebounding to four-digit territory.

Revenue acceleration continues

Third-quarter revenue jumped 17.2% year-over-year, representing an acceleration from 15.9% growth in the second quarter and 15.7% growth for full-year 2024. Management projects another 17% revenue increase for the fourth quarter, driven by price increases, new member additions and expanding advertising revenue.

The company’s operating margin has improved dramatically, reaching 27% in 2024 compared to 16% in 2023. Netflix expects its 2025 operating margin to hit 29%, representing continued expansion even before advertising becomes a major revenue contributor.

Advertising business scales rapidly

Netflix’s advertising operation launched less than three years ago and remains relatively small compared to the subscription business. However, the segment is scaling quickly and providing a crucial new growth avenue for the streaming platform.

The company expects to more than double its advertising revenue in 2025, with management expressing growing confidence in the business outlook. This rapid expansion allows Netflix to grow without relying solely on subscriber additions and price increases.

Advertising economics can be particularly attractive for streaming platforms. The fast-growing business should boost overall profitability over time as it reaches greater scale. The segment’s success demonstrates Netflix’s ability to diversify its revenue model beyond traditional subscriptions.

Strong financial performance

Netflix’s gross margin sits at 48.02%, reflecting efficient operations despite heavy content investment. The company does not currently pay a dividend, instead reinvesting profits into content production and technology development.

The stock’s 52-week range spans from $80.93 to $134.12 on a split-adjusted basis. Average daily trading volume stands at 3.6 million shares, indicating strong investor interest and liquidity.

Valuation considerations

Netflix trades at a price-to-earnings ratio above 47, which might initially appear elevated. However, the forward price-to-earnings ratio sits at 35, accounting for expected earnings growth from double-digit revenue increases and continuing margin expansion.

The company’s market leadership position provides some protection against competitors. Netflix’s scale and subscriber base create advantages that smaller streaming services struggle to match, even as deep-pocketed technology companies continue investing heavily in content.

Competitive landscape remains intense

Competition in the streaming industry shows no signs of easing. Major technology companies and traditional media conglomerates continue pouring resources into their own platforms, creating a crowded marketplace for viewer attention.

Despite this competitive pressure, Netflix has maintained its position as the streaming leader. The company’s extensive content library, global reach and brand recognition help it stand out in an increasingly saturated market.

Looking ahead

The stock split comes at a moment of strength for Netflix, with multiple growth drivers working in tandem. Subscription revenue continues expanding through a combination of price optimization and member growth, while the advertising business adds a new dimension to the company’s financial model.

Operating efficiency improvements suggest Netflix has found ways to scale profitably while maintaining its competitive content slate. The 29% operating margin target for 2025 would represent remarkable progress from just two years earlier.

Investors appear confident in Netflix’s trajectory, as evidenced by the stock’s year-to-date performance and elevated valuation multiples. The split makes shares more accessible to a broader range of investors while the company executes on its multi-pronged growth strategy.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. The author and publication are not registered investment advisors and do not provide personalized investment recommendations.