Netflix Could Jump 139% in 5 Years, According to Management

Core Viewpoint - Netflix has transformed from a struggling company in 2022 to one of the best-performing stocks, with a market cap exceeding $400 billion and aspirations to reach a $1 trillion valuation by 2030 [1][2]. Growth and Subscriber Base - The company added over 40 million subscribers last year, bringing the total to over 300 million, with a target of 410 million by the end of 2030, indicating a compound annual growth rate of about 5% [4]. - Netflix has historically grown its subscriber base by approximately 25 million to 30 million annually, suggesting that the 18 million annual addition target is achievable [4]. Advertising Revenue - Netflix has attracted new advertisers by lowering ad rates, with 43% of subscribers joining through the ad tier in February, indicating a shift towards ad-based revenue which has a higher ceiling than subscription revenue [6]. - The company aims to increase ad revenue from an estimated $2 billion this year to $9 billion by 2030, as part of a plan to double annual revenue to $80 billion [7]. Operating Income and Profitability - Netflix plans to grow operating income from $10.4 billion last year to $30 billion, which is essential for achieving the $1 trillion market cap goal [7]. - The advertising business is expected to reach scale, allowing for more profitable future growth as incremental costs to serve ads decrease [8]. Market Position and Resilience - The streaming giant has distanced itself from legacy media competitors like Disney, which have struggled in the streaming space [3]. - Despite a high price-to-earnings ratio of 49, indicating significant growth is already priced in, Netflix is well-positioned to outperform the S&P 500 and endure economic challenges, including potential recessions [9][10].