Netflix Shares Jump On Strong Subscriber Growth. Is It Too Late To Buy The Stock?

Shares of Netflix (NASDAQ: NFLX) soared after the video streaming company posted strong fourth-quarter results and offered an upbeat outlook. The stock has nearly doubled over the past year, extending a winning streak that has made Netflix one of the past decade's biggest winners with a gain of more than 1,500%.

Let's take a closer look at its Q4 results to determine if the company's latest momentum can continue.

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Strong membership growth

One area where Netflix continues to shine is in adding new paid members. Last quarter, the company saw its paid memberships climb 16% year over year to 301.63 million, as it added a record 18.91 million members in the quarter. The company has now seen double-digit paid membership growth the past six quarters. However, Q4 2024 is the last time the company will report membership numbers on a quarterly basis.

Data source: Netflix earnings reports.

Revenue, meanwhile, jumped 16% to $10.25 billion, which was above the $10.11 billion analyst consensus as compiled by LSEG.

U.S. and Canada revenue climbed 15% with a 12% jump in paid members and a 4% increase in average revenue per member (ARM). Asia once again led the way as revenue soared 26%, while European revenue jumped 18% and Latin American revenue rose 6%. These numbers show that Netflix continues to attract audiences around the world.

Earnings per share (EPS) more than doubled to $4.27. That topped the $4.20 analyst consensus.

Netflix's introduction of ad-supported memberships continues to see early success. For countries with ad-supported options, 55% of sign-ups were on ad-supported tiers. Meanwhile, memberships on ad-supported plans climbed 30% sequentially after a 35% quarter-over-quarter jump in Q3. Netflix noted that viewing hours on ad-supported plans have been similar to those on plans with no ads, and ad revenue doubled in 2024. Management expects to double its ad revenue again in 2025.

The strong membership growth also comes after the company enacted price increases in several regions over the past few quarters, including for some countries in Europe, Asia, and Latin America. Earlier this month, the company announced it would raise prices on most of its U.S. plans, as well as in Canada, Portugal, and Argentina.

Turning toward guidance, Netflix forecast first-quarter revenue to grow more than 11% year over year to $10.42 billion, with EPS rising about 6% to $5.58.

For 2025, Netflix increased its guidance. It now expects revenue of $43.5 billion to $44.5 billion, up from a prior view of $43 billion to $44 billion. It also upped its operating margin outlook to 29% from a previous forecast of 28%.

Is it too late to buy Netflix stock?

Netflix's ability to increase prices while still robustly adding new memberships puts it in a strong position. The company, meanwhile, has a very strong lineup for 2025 with new seasons of popular shows, including Stranger Things, Wednesday, Squid Game, and Alice in Borderland. It also began broadcasting the WWE's popular Monday Night Raw, drawing in 5 million viewers for its first show.

This content slate should help continue to bring in more memberships. The company is also introducing an option to add extra members to the ad-supported subcriptions in 10 of the 12 countries where it offers such plans. This, along with Monday Night Raw also running ads, should continue to boost its ad revenue this year. Netflix will continue to take time to build up its global ad network, but advertising should eventually become a very important part of its revenue stream and a big growth driver as it continues to scale.

From a valuation perspective, Netflix trades at a forward price-to-earnings (P/E) ratio of over 40 times analyst estimates for 2025. That's not cheap but also not out of line given the growth the company has been reporting and opportunity in front of it.

Data by YCharts.

While I wouldn't be backing up the truck for the stock at these levels, Netflix remains a good stock to own over the long term.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.