10 Stocks To Buy Before They Split Next

2. Netflix Inc. (NASDAQ:NFLX)

Share Price as of October 18: $689.66

Surge in Share Price in 5 Years: 150.51%

Stock Split Confirmed: no

Number of Hedge Fund Holders: 103

Netflix Inc. (NASDAQ:NFLX) is a global streaming service provider that offers TV shows, movies, documentaries, and original content. Founded in 1997 as a DVD rental service, it transitioned to a streaming platform in 2007. It has revolutionized the way people consume entertainment and is considered a pioneer in the streaming industry.

The company has introduced a cheaper, ad-supported tier powered by AI in late 2022 to enhance user experience and deliver more effective ads. As a pioneer in online streaming, it’s a top-performing stock. Its massive and growing subscriber base drives significant revenue growth. In 2023, it achieved record UK revenues, primarily due to increased subscriber numbers following its crackdown on password sharing.

Revenue was up by 15.02% year-over-year in Q3 2024. Despite challenges in membership growth and ad monetization, it added over 5 million new subscribers and improved its operating margin to 29.6%. International markets drove subscriber growth, and the ad-supported tier saw a 35% quarter-on-quarter increase in memberships. The company’s strategic shift towards advertising has solidified its position as a strong investment.

Management announced that the company’s first-party ad server is launching in Canada this quarter and will expand to other markets in 2025. Partnerships with Trade Desk and Google Live are progressing well. There are plans for more ad formats, features, and measurement tools.

Netflix Inc. (NASDAQ:NFLX) projects a 14.7% increase in revenue year-over-year for Q4, with a target operating margin of 21.6%. Looking ahead to 2025, it anticipates annual revenue between $43 billion and $44 billion, driven by continued subscriber growth and higher average revenue per subscriber. The international expansion and ability to adapt to changing consumer preferences position it for continued growth.

Polen Focus Growth Strategy stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q2 2024 investor letter:

“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”