Netflix has a lot to show off the mask on January 21st. That’s why traders need to raise peacefully Pay attention.

Netflix (NASDAQ: NFLX) the stock tripled between 2023 and the 2024 loss. With the streaming giant set to report fourth-quarter earnings on January 21, traders will be looking to learn the industry’s One Year Deliveries spending plans for 2025 and whether Netflix plans to raise prices this year.

For this reason, Netflix is ​​on hiatus from its sport with no signs of slowing down, and whether the improved stock is worth buying for now.

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Listing Credit: Getty Photographs.

Anatomy of a Netflix Breakthrough

The following chart shows the significance of Netflix’s increase in gross sales and operating margin.

NFLX Income (TTM) knowledge YCharts.

In 2022, the stock fell, along with a broader promotion of Enhanced shares, as Netflix’s margins fell and traders questioned the viability of its industry model. Since then, Netflix has returned to growing gross sales and generating record operating margins.

The first and overwhelming poll left out is that Netflix’s industry puppet seems a bit obnoxious. The company spends a whopping billion of dollars a year to produce products that it hopes will captivate audiences with growing engagement on the platform and justify future increases in its footprint. If Netflix loses audience interest with sloppy delivery, or if its customers simply gravitate to other streaming platforms, the industry could potentially suffer a significant slowdown.

I agree that it’s important to imagine that Netflix is ​​no longer the same company it was years ago. He realized from previous mistakes that he focused too much on quantity in the device of quality. Netflix peaceful produces a ton of delivery and has its staggering share of failures. Nevertheless, it also has great success in various categories, which makes it stand out from its competitors.

Basically, the most straightforward metric to use when measuring Netflix’s footprint is mask time. Screen time is more important than the number of subscribers because it is responsible for engagement. In Netflix’s Q2 2024 shareholder letter, the company cited a Nielsen filing that announced streaming accounted for 40.3% of U.S. TV screen time per day, followed by 27.2% for cable, 20.5% for broadcast and 12% other. From the total mask time per day, AlphabetYouTube accounts for 9.9%, taken by Netflix at 8.4% — the system these two companies have now mixed together comprises a whopping forty-five% of US TV streaming mask time.

In Netflix’s third-quarter letter to shareholders, the company acknowledged that each paid membership is an average of two hours a day of mask time — an extremely spectacular solution. The company has touted its combination of licensed and mainstream stills and motion pictures, as well as new publicity for video games and ongoing events, as a compelling set of footprints compared to other streaming companies, which are forced to bundle and more cost-effectively print their offerings to support and attract users.

In each letter to shareholders, Netflix discusses the ratings of hit shows and future releases. Blockbuster shows fancy Squid Sports (Season 2), Outer banks (Season 4) and Respect is blind (Season 7) all came out at some point in the fourth quarter, Netflix reported Tuesday. So traders need to sit back and take a look at how these performances have played out and what’s in store for 2025.

Q4 expectations

Netflix is ​​projecting fourth-quarter revenue of $10.13 billion, which could possibly represent a full quarterly revenue year-to-date and 14.7% year-over-year growth. Operating margins are expected to come in at 21.6%, but that’s the normal seasonality of Netflix’s fourth quarter, which is typically the lowest quarter of a year. Compared to the fourth quarter of 2023, Netflix expects operating income to grow 46.4% and margins to grow 21.6% — up 4.7%.

Again, it needs to focus more on how Netflix’s holiday season was delivered and expectations for 2025. Marketers will try to inquire about Netflix to keep its mid-young people growing revenue and mid-to-high 20% operating margins.

Imaginary footprint expansion

In 2023, Netflix phased out its classic program and implemented Same earlier with a set of Commercials at $6.99 per month, while Same was previously priced at $15.49 per month and Top class at $19.99 per month. – a month. The same previously stood at $15.49 per month starting in 2022, with Top class increasing to $22.99 per month in 2024.

If I had to bet, I’d exclaim that we’re within the same previous risk in 2025 and maybe in the same earlier with commercials so smart because of the footprint expansion.

Traders need to take the tone of the administration’s earnings call story in stride in light of the potential footprint expansion. On the Q3earnings call, Netflix mentioned its long-term monetization cycle. He constantly admitted that, so you can clarify future footprints, he should increase as a long-term because he provides quality programs throughout the plan in which with different categories and efforts. This system is what makes Netflix an elite streaming provider that might be able to charm a nice job that would support a family.

Stretched valuation

Since Netflix has been most provocative due to significant earnings growth (in the case of gross sales growth) over the past 5 years, the P/E ratio is now arguably the most provocative metric to consider Netflix’s valuation. .

Netflix’s P/E is 49 and its forward P/E ratio is 36. This plan, according to consensus analyst estimates, would give the stock a P/E of 36 in line with its brand new footprint and trailing one-year earnings. This makes Netflix much more expensive than other communication giants Meta platformswhich has a forward P/E of 24, and Alphabet, which has a forward P/E of 22.

Netflix certainly deserves the highest rating, but the question is, how much is it worth? If Netflix can continue to grow its streaming market share, and streaming continues to take the ultimate market share away from cable and broadcast, then it makes sense to try and see Netflix evolve into its valuation over time. Still, it’s true right now that inventory is pretty low, and retailers have to pay the most if they want to cut into the Netflix pie.

I agree that now is a great time for threat tolerant retailers to open a home page on Netflix and for many retailers to simply endorse the company on the watch list. Still, the company might be able to boost its profits if it rolls out a footprint expansion this year.

Netflix needs to prove it’s worth the extremely high rating

In the previous period, Netflix struggled with spending on delivery. He would have too many failures and his hits were inconsistent. Nowadays, Netflix is ​​progressing all over the plan it is in with various categories, from ongoing events to dramas, comedies, historical works and niche activities.

The stock is on the expensive side, but it may be quite possibly a good maybe a quiet buy while you buy into the long-term future of the industry.

The upcoming earnings call is extremely important for the company. This may be about whether the Q4 delivery list has become immediately worthy of a launch, as Netflix has hinted it will be, and whether the company is confident it will stage a worthy encore in 2025. So there’s no harm in watching Netflix from the sidelines until the valuation becomes more compelling.

Netflix has nothing to show for it as a company, but it has a whole lot to show for it as a stock, given its high valuation.

Need to calmly invest $1,000 in Netflix?

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Randi Zuckerberg, veteran market trends director and Fb spokeswoman and sister of Meta Platforms CEO Heed Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Daniel Foelber has no reserves in any of the mentioned stocks. The Motley Fool has positions and recommends Alphabet, Meta Platforms, and Netflix. The Motley Fool has coverage with the disclosure.

The views and opinions expressed herein are those of the creator and do not necessarily reflect those of Nasdaq, Inc.