Is Now the Time to Buy Netflix Stock?

Core Viewpoint - Netflix's stock experienced a decline despite reporting a 17.2% year-over-year revenue growth, attributed to high valuation and a significant tax expense impacting earnings per share [1][5]. Financial Performance - The company achieved a revenue of approximately $11.5 billion, up from 15.9% growth in the previous quarter, driven by member additions, pricing growth, and advertising [4]. - Earnings per share were reported at $5.87, missing analysts' expectations of $6.97 due to a $619 million non-income-tax expense related to a dispute in Brazil [5]. - For Q4, Netflix projects revenue of about $12.0 billion, indicating a 16.7% year-over-year growth, with earnings per share expected to be around $5.45 [6]. Future Guidance - Netflix anticipates 2025 revenue of roughly $45.1 billion, reflecting about 16% growth, but has lowered its operating margin outlook to approximately 29% due to the Brazilian tax expense [7]. - The company expects to double its advertising revenue in 2025, indicating strong growth potential in this high-margin segment [9]. Valuation Concerns - The stock's price-to-earnings ratio is in the low 50s, with a forward price-to-earnings ratio of about 37, suggesting limited room for error amid intense competition from tech giants like Apple, Amazon, and Alphabet [8]. - Despite the valuation concerns, the combination of double-digit revenue growth and expanding operating margins is seen as a substantial tailwind for earnings growth [10]. Investment Considerations - For current shareholders, the quarter's results do not undermine the investment thesis, as revenue growth and operating margins remain strong [11]. - Potential investors considering buying the dip may want to remain cautious due to the full valuation despite the strong business fundamentals [11].