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Netflix (NFLX) announced its first stock split in nearly a decade with shares trading above $1,100.
Netflix revenue grew 17.2% year over year in Q3 with guidance pointing to 16.7% growth in Q4.
The final season of Stranger Things begins later this month and runs through Dec. 31, potentially drawing in more susbcribers.
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Netflix (NASDAQ:NFLX) excited investors last week with its announcement it would split its stock 10-for-1 after the market closes tomorrow. Shares will begin trading on the split-adjusted basis starting Monday.
This marks the company’s first split in over a decade, following a surge that pushed shares above $1,100. Investors are buzzing about potential short-term gains from heightened enthusiasm, but the real question is whether this event makes Netflix a timely buy. While splits don’t alter a company’s core value, they often spotlight strong underlying performance. Not every company that splits its stock actually benefits, so let’s see if Netflix’s business warrants buying — no matter if it is before or after the split.
One of Netflix’s standout features is its accelerating revenue growth, even as it matures in the competitive streaming landscape. In the third quarter, sales climbed 17.2% year over year, marking the strongest pace since 2023. Guidance for the fourth quarter points to a similar 16.7% increase, driven by effective monetization tactics like ad-supported tiers and global expansion.
This consistency stems from Netflix’s sticky subscriber base — viewers often stay or return due to compelling content, setting it apart from rivals that have struggled or folded. Even when they subscribe to other services, the streamer is the foundation upon which viewers build other complementary offerings.
Breaking it down regionally, the U.S. and Canada — its largest market — posted 9% growth with $4.6 billion in revenue in Q3. Europe, the Middle East, and Africa followed at 16% on a constant currency basis with $3.4 billion, while Latin America soared 27% and Asia-Pacific hit 26% on $1.17 billion and $1 billion, respectively.
This widespread performance underscores management’s savvy international strategy, crucial as non-U.S. regions now contribute over half of total revenue. With untapped markets still ahead, Netflix is positioned for sustained expansion.
Despite its premium pricing, Netflix’s stock isn’t as inflated as some AI-driven stocks. Trading at about 34 times next year’s expected earnings, it undercuts valuations of chipmaker Advanced Micro Devices (NASDAQ:AMD) at 40 times forward earnings as well as consumer staples like Costco (NASDAQ:COST), which sits at 42 times.
Netflix’s service increasingly feels essential, offering affordable entertainment that holds up during economic dips. Analysts project 11% average annual revenue growth over the next five years, supported by subscriber retention and profitability gains. This blend of growth and resilience justifies the multiple, especially compared to broader market averages.
Stock splits themselves are cosmetic — they multiply shares outstanding while slashing the price proportionally, leaving market cap and ownership stakes unchanged. For Netflix, this means roughly 423 million shares become 4.23 billion, dropping the price to around $113. No fundamental shift occurs; it’s like slicing a pizza into more pieces without adding toppings.
Yet, splits often reflect management’s confidence in ongoing momentum, as seen in Netflix’s history. After its 2015 split, shares rose significantly, and data from Bank of America shows split-announcing companies average 25% gains in the following year — double the S&P 500‘s typical return. This enthusiasm can draw in retail investors, boosting liquidity and short-term pops, though it’s not guaranteed.
Adding fuel to the bull thesis, Netflix’s content pipeline looks robust. The final season of “Stranger Things,” its third-most-watched series, rolls out in phases beginning later this month through Dec. 31, likely sparking subscriber surges as past installments did. Hits like “Frankenstein” and “Nobody Wants This,” plus NFL holiday games, broaden the service’s appeal.
These elements, combined with the potential for a $1 trillion market cap by 2030, highlight Netflix’s edge in a crowded field.
Netflix stands out as a solid long-term buy-and-hold stock, thanks to its proven growth, global reach, and resilient model — regardless of purchasing before or after the split. Date-specific buys aren’t a strategy to rely on routinely, as timing the market is tricky and often fails.
Yet scooping up shares now could capitalize on the post-split investor hype that historically lifts prices. While investors should keep their focus on its business fundamentals after the event, Netflix remains a compelling, long-term pick for patient portfolios.
