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Prediction: Netflix (NFLX) Will Be the First Stock to Split Its Stock During Trump's Presidency
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It has been nearly 10 years since Netflix (NASDAQ:NFLX) last split its stock, but it could be the first one to announce one after Donald Trump takes office in January.
With solid earnings growth pushing the stock higher and its new ventures already gaining traction, NFLX stock is trading at levels well above where they were at the last two times it split them.
The movie streamer has strong momentum behind it and there is every indication its stock will continue its trajectory higher at least through 2030. It makes this an opportune time for Netflix to announce a stock split once again.
24/7 Wall St. Insights:
- Netflix (NFLX) has split its stock twice in its history, both times at prices far below where it currently trades.
- There is significant momentum behind the stock based on its existing business model and new initiatives, making a stock split very soon quite likely.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Content is king
Bill Gates is credited for coining the term “content is king” back in 1996, talking about how the internet will revolutionize the consumption of information and entertainment. Yet it quickly became the mantra of streaming companies to underscore the importance of programming to their audience and their bottom line.
Few other streaming services have fulfilled that prediction better than Netflix. With a broad mix of original and licensed movies and TV shows, the streamer is the industry behemoth with some 283 million paid subscribers. Its closest competitor is Disney (NYSE:DIS) with 174 million, and that is only achieved through the combination of Disney+ and Hulu. As a standalone streaming service, Disney+ has just 120 million.
Investors can expect those numbers to grow. While more mature markets like North America won’t see the same sort of heady growth it did in the past, Europe and emerging markets remain prime regions for future gains.
But don’t count out North America. With all the struggles other streaming services have had, expect them to return to Netflix for distribution of their content once more. The gains Netflix makes here in growing its audience could still surprise analysts.
New ventures will support future growth
The Mike Tyson-Jake Paul boxing match set streaming records for a sporting event. The live broadcast drew in 108 million viewers, with 65 million concurrent households at its peak, which made it the “most-streamed sporting event ever.”
Not that there weren’t issues with buffering from having so many people flocking to the site, but it was a massive success anyway and paves the way for future broadcasts. Netflix will have live NFL games on Christmas Day and there will be weekly programming with WWE wrestling in 2025.
Netflix doesn’t expect its live content to reach the kind of numbers its on-demand video has, which has grown to 200 billion hours, but it offers the potential for substantial growth going forward.
Game play could be a hidden gem
Netflix entry into the gaming market has the opportunity to be a real sleeper market. The streamer says it is “planting seeds” for the future with its gameplay based on Netflix IP. The Squid Game TV series that became a massive cultural hit in 2021 and will launch a second season at the end of this year, will be getting the game treatment soon. There will also be games based on other properties, including Virgin River Christmas, The Ultimatum, and Monument Valley 3.
Advertising is about to make its mark
Arguably the biggest growth driver for Netflix will be advertising. Beginning in 2025, the streamer anticipates ads will become a significant contributor to revenue and ultimately profits.
While advertising revenue is currently doubling each year, it is starting off from a very small base. Netflix says that will change next year as ad-supported accounts represented 50% of the new membership sign ups it saw in the third quarter while ad plan memberships grew 35% from the second quarter.
Netflix says in the markets it offers the ad plan there is a $600 billion consumer spend that it is only capturing 6% to 7% of the total. Co-CEO Gregory Peters told analysts, “That’s tremendous upside if we can just stay focused on that continuous improvement and drive to that future.”
Key takeaways
When Netflix first split its stock in 2004, its shares were trading at $72 a stub. It split them 2-for-1. In 2015, it split shares again, this time 7-for-1, when the stock hit $700 a share.
Today NFLX stock goes for almost $900 a share. While I foresee shares hitting around $1,050 a share within the next year based on the factors discussed above, Pivotal Research just raised its price target on the streaming service to $1,100 a share, or almost 23% above its current trading level.
That makes Netflix stock a prime candidate for a stock split and I expect one to occur soon, possibly as early as January or soon after.
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