Netflix (NASDAQ:NFLX) has seen its stock price soar by 33.82% since the year's start, significantly outperforming the Zacks Consumer Discretionary sector. This impressive growth can be attributed to Netflix's unparalleled content production and strategic moves, such as introducing ad-supported tiers and venturing into gaming. These initiatives have not only diversified Netflix's revenue sources but also played a crucial role in attracting new subscribers.
The company's commitment to original programming continues to yield positive results. High-profile releases and a continuous supply of popular shows and movies have been instrumental in keeping subscribers engaged while drawing in new ones. Netflix's focus on global content production, with notable projects in Japan, Indonesia, the Philippines, and Thailand, alongside its expansion into gaming and animated series, has been key to its international expansion efforts.
Looking ahead to 2024, Netflix is poised for robust revenue growth, with expectations set at 14-15%. The Zacks Consensus Estimate for revenues stands at $38.68 billion, marking a 14.7% increase year over year. Earnings are also projected to rise significantly, with the consensus estimate at $19.08 per share, reflecting a 58.6% growth from the previous year. Additionally, Netflix aims to achieve a full-year 2024 operating margin of 26%, an improvement from its earlier forecast of 25%.
Despite the fierce competition from streaming giants like Disney+, HBO Max, and others, Netflix's early entry into the market, extensive global presence, and a proven track record of delivering culturally impactful content distinguish it from its competitors. However, potential investors should remain mindful of Netflix's premium valuation and the ever-changing competitive landscape in the streaming industry.
Currently, Netflix trades at 6.56X forward 12 months sales, which is above its five-year median of 6.02X. This suggests that the stock's valuation is somewhat high compared to its historical range and the industry average. Despite these valuation concerns and competitive pressures, Netflix's continuous innovation and adaptability indicate its capability to sustain its market leadership and leverage the expanding digital entertainment sector. With a Zacks Rank #2 (Buy), Netflix is recognized for its strong investment potential.