Netflix Shares: Predictions for 2025's Market Landscape
Streaming Giant Netflix has experienced a remarkable year, witnessing a rise of approximately 88% since the beginning, currently trading at approximately $920 per share. In comparison, rival company Disney has seen a growth of approximately 26% in the same period. The surge in Netflix's stock price can be attributed to their measures against password sharing and the introduction of an advertising-supported streaming plan. These moves have resulted in an increase of over 22 million new subscribers during the first nine months of the year, bringing the total user base to about 283 million subscribers. But what does the future hold for Netflix stock in 2025? It's worth noting to also explore Is Warp Speed Therapeutics Stock Overvalued?
Slackening Subscriber Growth
Netflix's growth in 2024 was primarily due to cracking down on password sharing and launching a more affordable ad-supported streaming plan. The implementation of this strategy across over 100 countries has resulted in more subscribers or monetization of existing users. Moreover, the ad-supported tier has seen significant adoption, with over half of new subscribers in eligible regions opting for this cost-effective plan. However, with major developments in password sharing and advertising now widespread in key markets, future growth prospects may be limited. This could lead to muted growth in subscribers in 2025, as the company may have already captured demand that was intended for later years. The decision by Netflix to halt reporting subscriber numbers starting in 2025 may suggest that the company expects growth to plateau. Simultaneously, the *Hedge Fund portfolio* has outperformed the S&P 500, delivering over 91% returns since inception.
Potential Price Hikes Ahead
Netflix recently increased pricing for its Basic and Premium plans by $2 and $3 per month, respectively, but left its popular options at $7 and $15.50 per month. Since the last price hike for its full-HD plan was in January 2022, a future raise in 2025 could be a possibility as Netflix aims to offset its increasing content spending. Also, with customers becoming more accustomed to Netflix's changes, more significant price hikes might be implemented without much opposition from users. However, the growing competition could potentially reduce the magnitude of the price hikes, like Disney's streaming bundles offering Disney Plus, Hulu, and ESPN Plus for as low as $15 per month.
Evolution of Margins
Netflix's margins have significantly expanded, reaching around 30% in Q3 2024, up from 22% in the previous year, primarily due to higher per-user revenues and moderated content investments. In 2025, margins may remain stable as Netflix continues to expand its revenue base. Yet, there are concerns, too. As Netflix ventures into live sports programming, content costs are expected to escalate, with rising competition possibly leading to increased churn rates or decreased new sign-ups. These factors could negatively impact margins. Check out our Netflix Downturn Scenario: $400 for more analysis.
Netflix stock has historically displayed a high level of volatility. In 2021, its returns were 11%, fallen to -51% in 2022, and soared to 65% in 2023. In contrast, the *Impressive Portfolio*, a collection of 30 stocks, has been less volatile and consistently outperformed the S&P 500 each year over the same timeframe. The stable returns are due to a lower risk profile in the portfolio and less market turbulence. Is Netflix stock currently a smart investment?
Valuation Concerns
Currently, Netflix's stock value is approximately $920 per share, trading at around 40x consensus 2025 earnings. This price appears expensive in our opinion, given the strong performance of the stock in the past months. However, the market tends to focus on short-term successes and may assume that Netflix will maintain its strong streak of subscriber additions and revenues growing comfortably in the double-digits in the long-term. However, there's a genuine possibility that the company will soon experience a slowdown in growth as password-sharing crackdowns and advertising tiers reach their full potential. We value Netflix stock at approximately $613 per share, which represents a 33% discount compared to its market price. For further analysis about Netflix valuation and price estimates, visit our analysis: Netflix: Overvalued or Undervalued?
Invest with Trefis Market-Beating Portfolios
- Despite the impressive growth in Netflix's revenue and subscriber base, questions about its NFLx valuation arise due to its current trading price of approximately $920 per share, which is around 40x consensus 2025 earnings.
- With Netflix's revenue from its ad-supported tier contributing significantly to its total revenue, analyzing Netflix's NFLx revenue in relation to its ad-supported plans could provide valuable insights into its future profitability.
