Over the last few decades, the stock market has experienced remarkable growth. This favorable environment has ideally fostered the emergence of several multi-trillion dollar corporations. Such enterprises belong to an exclusive class.
Investors are undoubtedly acquainted with a compact yet pioneering, sector-top company that presently possesses an market cap totaling $384 billion (as of March 13). Its value has risen rapidly. In my opinion, it should be recognized as a strong contender for joining the elite group of companies valued at over a trillion dollars sometime down the line.
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Is this single invincible stock capable of doing so? Apple , Microsoft , Nvidia , Amazon , Alphabet , and Meta Platforms In the $1 trillion club by 2035?
A category leader
If it's not already, Netflix (NASDAQ: NFLX) Should be on investors' radar. Its shares have surged over 66,600% in the last two decades, without question making it one of the top performers during this period.
The significant growth occurred solely due to Netflix entirely upending the conventional media landscape. The firm merits recognition for establishing the streaming sector in its current form.
It heavily emphasized innovation to provide customers with an improved experience over traditional cable television. Consequently, Netflix undoubtedly deserves mention alongside other leading technology giants.
The company’s expansion has been astonishing. Five years back, it served 167 million clients. Now, this number has surged to 302 million across 190 nations. Similarly, revenue has skyrocketed from $20 billion in 2019 to $39 billion in the previous year.
Despite its present scale, the company continues to explore innovative strategies to sustain expansion. Netflix has taken measures against household password sharing and launched a less expensive subscription option featuring ads aimed at budget-conscious consumers. Additionally, they have begun expanding their involvement in live events and sports programming.
Netflix's profit margin stands out significantly. This can be attributed largely to its substantial size, a result of being an early entrant into the market, which places it considerably above competing companies within the sector.
By 2025, company leaders aim for an operating margin of 29%, anticipating that free cash flow will reach approximately $8 billion. This projection indicates growth compared to the previous year’s figures.
Netflix has demonstrated its ability to adjust prices upward as well. The management aims to continually enhance subscriber benefits, which instills the assurance required to periodically increase their rates.
Getting to $1 trillion
To hit a $1 trillion valuation in ten years, the market capitalization would have to increase by just 160%. Over the last ten years, Netflix’s market cap surged by an impressive 1,320%. It seems logical to anticipate a deceleration in this growth rate.
The valuation also plays a crucial role. The stock is presently trading at a price-to-earnings The price-to-earnings ratio (P/E) stands at 45.3. Suppose we reduce this multiple to 25 by 2035, which seems plausible as Netflix should be entering a more established stage by then. For Netflix to achieve a $1 trillion market capitalization, earnings per share (EPS) would have to increase by an annual rate of 16.7%.
Once more, earnings per share have increased at a significantly quicker pace over the last ten years. Therefore, it isn’t far-fetched to think that given this trend, the firm could join the $1 trillion market capitalization club within a decade.
Don't buy the stock
Netflix appears to be well on track toward reaching the trillion-dollar milestone. Nevertheless, this doesn’t necessarily mean the stock should be considered an instant purchase for investors. Even after accounting for the current share price being down 15% from its peak in February, the PE ratio of 45.3 suggests that the valuation remains quite high. Thus, it may not yet represent a compelling buying opportunity despite Netflix’s promising trajectory.
Nobody will dispute that the company’s business is performing exceptionally well. However, this success is entirely mirrored in its valuation, leading me to believe it offers investors little advantage. margin of safety Netflix needs to surpass the high hopes built into its stock value for investors to achieve a favorable outcome. As such, the most prudent strategy would be to hold off until a more attractive valuation presents itself before making a purchase.
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*Stock Advisor returns as of March 14, 2025
John Mackey, who previously served as CEO of Whole Foods Market—an entity now owned by Amazon—is part of The Motley Fool’s board of directors. Randi Zuckerberg, formerly responsible for market development and acting as a spokesperson for Facebook, and also the sibling of Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board too. Additionally, Suzanne Frey, an executive at Alphabet, is included among The Motley Fool’s board members. Neil Patel His clients do not hold any shares in the companies listed. However, The Motley Fool holds stakes and promotes Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, and Nvidia. Additionally, they recommend certain financial instruments such as long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. Furthermore, The Motley Fool has a disclosure policy .
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