From shipping DVDs by mail to becoming a worldwide entertainment juggernaut, the rise of Netflix (NFLX -1. 04%) is worth studying. The is a disruptive and innovative category creator.
It has taken care of investors, with s soaring 54,700% in the past two decades. This means that had you invested just $1,900 in this ing stock in July 2005, you'd have $1 million today.
But is Netflix your ticket to becoming a millionaire one day in the future. Image source: Getty Images.
Netflix has become a global entertainment icon At the end of 2024, Netflix counted a whopping 302 million rs. That figure was up 81% from the 167 million reported at the end of 2019.
Despite a global pandemic, supply chain bottlenecks, inflationary pressures, higher interest rates, and geopolitical and macro uncertainty, the found tremendous success.
This momentum continued into 2025, with first-quarter revenue increasing 12. 5% year over year. To keep growing, Netflix is expanding further into international, such as Asia and Africa.
And Canada, more mature where the opportunity isn't so big anymore, the leaned on occasional price increases to keep the ball rolling.
What's more, management is doing things that it previously shunned. Netflix introduced a successful ad-based subscription tier to attract price-sensitive consumers.
It also put a stop to accounts that were sharing passwords. Netflix is even stepping into sports. These pivots showcase strategic nimbleness. The company's fitability is worth focusing on.
After posting a stellar operating margin of 27% in 2024, the executive team predicts that Netflix will report a 29% margin this year. This highlights the scalability of the model.
Higher revenue leads to an imving bottom line, as Netflix's main expenses aren't growing at the same rate as the top line. Looking at the rest of the ing industry, it's that Netflix stands out.
The company's biggest rival, Disney, forecasts a 10% operating margin for its Entertainment ing segment (Disney+ and Hulu) in fiscal 2026. Netflix achieved this figure in 2018.
It's well ahead in ing, giving it the financial resources to invest in bolstering its content offerings.
Expectations are high, but for a good reason This has become a dominant force in the media and entertainment landscape.
It deserves credit for disrupting the legacy cable networks by leaning on expanding broadband internet penetration and its nology wess to vide a better service to viewers.
But the market is fully aware of Netflix's investment merits. As a result, expectations are high, as investors view the in a very favorable light. This is when looking at Netflix's valuation.
S trade at a price-to-earnings (P/E) ratio of 60. That's not cheap at all. In fact, it's more than double the multiple of the overall S&P 500 index.
To be fair, though, I believe it's totally reasonable for the to register double-digit earnings per (EPS) growth on an annual basis for the foreseeable future.
Wall Street agrees, as analyst consensus estimates call for EPS to increase at a compound annual rate of 23. 6% between 2024 and 2027. The prediction for Netflix's bottom-line trajectory is impressive.
However, I don't think it automatically makes the stock a smart buy. The valuation is too steep, creating a headwind for spective investors.
Don't be surprised if the P/E ratio is lower five years from now. This means that Netflix ly isn't going to make you a millionaire.
While the stock was undoubtedly able to generate monster wealth in the past for its longtime holders, the opportunity to achieve incredible returns going forward is limited.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.