The Netflix Stock Split Is Here. Are Shares Still a Buy?

• Shares volition commencement trading connected a split-adjusted ground connected Nov. 17.

• Revenue maturation has accelerated successful caller quarters.

• One cardinal valuation metric puts the stock's valuation into perspective.

• 10 stocks we similar amended than Netflix ›

Since it past divided its banal backmost successful 2015, shares of Netflix (NASDAQ: NFLX) person surged connected the backmost of unthinkable concern maturation and accrued assurance successful the company's semipermanent concern thesis. This capitalist optimism has made the banal a Wall Street darling, putting shares good beyond $1,000 -- a level that makes a banal divided sensible. To this end, the institution precocious announced it is splitting its banal 10-for-1.

The streaming work institution says the divided is astir accessibility, particularly for employees who enactment successful the company's banal enactment program. Still, it's a seminal infinitesimal for the banal and shareholders -- particularly considering the roller coaster shareholders person been connected successful caller years. Capturing the stock's chaotic volatility during this period, shares traded astatine levels beneath $200 arsenic precocious arsenic 2022 -- a acold outcry from today's levels.

With shares acceptable to statesman trading connected a split-adjusted ground tomorrow, it's a bully clip to look astatine the stock. Is it a buy, adjacent aft the split?

Driven by a operation of terms hikes, rank growth, and accrued advertizing revenue, Netflix's third-quarter gross roseate 17.2% twelvemonth implicit twelvemonth -- an uptick from 15.9% maturation successful the 2nd 4th and supra the company's 15.7% top-line maturation successful 2024. Management besides guided to different 17% summation for the 4th quarter, which implies the reacceleration is holding into year's end.

Key to the company's maturation communicative is its advertizing business. While this portion of Netflix's cognition is little than 3 years aged and is inactive tiny comparative to its subscription business, it is scaling fast.

"We person a coagulated instauration and are progressively assured successful the outlook for our ads business," absorption said successful the company's third-quarter update. "We are present connected way to much than treble our ads gross successful 2025..."

That matters due to the fact that ads tin widen Netflix's maturation runway without relying solely connected caller subscribers and terms hikes. And due to the fact that advertizing economics tin beryllium attractive, the fast-growing concern volition apt bolster profits meaningfully implicit time.

Even earlier the advertizing concern becomes a important information of wide revenue, Netflix's halfway concern is already driving operating borderline expansion. The company's 2024 operating borderline was 27%, up from 16% successful 2023. And absorption expects its 2025 operating borderline to grow to 29%.