Shares of Netflix (NASDAQ: NFLX) charged sharply higher on Wednesday, surging as much as 14.9%. As of 10:58 a.m. ET, the stock was still up 11.1%.
The catalyst that propelled the streaming pioneer higher was the company's financial results, which were much better than investors had anticipated.
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Subscriber growth is soaring
For the fourth quarter, Netflix reported revenue that grew 16% to $10.2 billion. The company also expanded its operating margin, which increased by 530 basis points to 22.2%. This resulted in diluted earnings per share (EPS) that soared 102% to of $4.27. It also marked the first time Netflix generated $10 billion in operating income in a single quarter.
To give those numbers context, analysts' consensus estimates were calling for revenue of $10.11 billion and EPS of $4.20, so Netflix cleared both hurdles with ease.
Netflix will stop reporting its subscriber numbers in 2025, but Netflix dazzled investors during the final quarter of 2024, adding nearly 19 million new paid users, "the biggest quarter of net adds in our history," according to the company. Wall Street had expected it to add nearly 9.2 million subscribers, helping to illustrate the magnitude of its outperformance.
The future looks bright
If that weren't enough, management increased its guidance for 2025. Netflix is now forecasting revenue of $44 billion at the midpoint of its guidance while increasing its operating margin outlook to 29%, up from its previous guidance of $43.5 billion and 28%, respectively.
Management laid out a number of drivers that will fuel future growth, including:
- An ongoing strong content push
- Continued expansion of its ad-supported tier
- Increasing its live content push
Despite Netflix's long track record of strong results, the stock remains attractively priced, at 36 times next year's expected earnings. While that's certainly a premium, consider this: Netflix stock gained 83% last year, more than three times the return of the S&P 500.(SNPINDEX: ^GSPC). The streaming pioneer has also soundly thrashed the broader market results over the past three-, five-, and 10-year periods.
Given its track record, I would suggest it's worthy of a premium.
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Danny Vena has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
