Netflix (NASDAQ:NFLX) shares recently soared to a new 52-week high, reaching $715.66 before closing at $704.32 on September 19. This surge marks an 83.3% increase in Netflix stock performance over the past year, outpacing both the broader market and its competitors in the streaming industry. Investors are now questioning whether they should capitalize on this high or wait for a potential dip.

Password Crackdown and Content Expansion Boost Netflix Stock

One of the key factors driving Netflix stock performance is the company’s successful crackdown on password sharing. Initially met with skepticism, this move has turned non-paying users into paying customers, significantly boosting Netflix’s revenue. The strategy has proven particularly effective in regions where the crackdown was implemented, leading to a marked increase in new subscriptions.

Another major factor in Netflix’s strong performance is its continuous investment in original content. By producing critically acclaimed series and films, Netflix has managed to stand out in an increasingly crowded streaming space. This year’s Geeked Week 2024, held from September 16-19, featured sneak peeks of highly anticipated series like Squid Game Season 2, Wednesday Season 2, and the Devil May Cry anime, set to be released in April 2025. These content announcements have helped build momentum for Netflix stock.

Global Expansion and Revenue Growth Prospects

Netflix has also been focusing on international expansion, producing local content in various countries to diversify its subscriber base. This approach not only helps Netflix penetrate new markets but also provides a buffer against regional economic downturns. With total paid memberships projected to reach 290.4 million by the end of 2024, according to Zacks, Netflix expects a year-over-year subscriber growth of 11.6%.

Netflix’s global expansion is complemented by its exploration of new revenue streams. Beyond streaming, Netflix is venturing into mobile gaming and limited theatrical releases for select films. For example, its Blood Line: A Rebel Moon game will be a Netflix exclusive, scheduled for release in 2025. Other games like Monument Valley 3 and Civilization 6 will join Netflix’s gaming catalog in late 2024. These developments could further boost Netflix stock performance as they open new avenues for revenue growth.

Financial Health and Forecast for 2024

From a financial standpoint, Netflix has transitioned from a cash-burn phase to generating positive cash flow. This shift is important as the company can now fund its content investments through operations rather than debt. Netflix projects revenue growth of 14-15% in 2024, with earnings per share expected to grow by 58.6% compared to 2023.

Netflix’s forward price-to-sales ratio of 7.2 exceeds its five-year median of 6.34, indicating that the stock may be trading at a premium. While the current valuation is high, the company’s improved operating margins and cash flow provide some justification for the elevated multiples. Netflix has also revised its operating margin expectation for 2024 to 26%, up from its previous forecast of 25%.

Challenges in a Competitive Landscape

Despite its strong Netflix stock performance, the company faces significant competition. Rivals like Disney+, HBO Max (owned by Warner Bros. Discovery), and Apple TV+ continue to pressure Netflix’s market share. Additionally, Netflix must compete with non-streaming platforms such as YouTube and TikTok for viewers’ attention.

Another challenge for Netflix is its stretched valuation. The company’s stock is currently trading at a higher multiple than many of its peers in the broadcasting industry, making some analysts question whether the recent rally can be sustained.

Conclusion: Buy Now or Wait?

Netflix’s recent performance, buoyed by its strategic moves in content and revenue diversification, has been impressive. However, with the stock trading at a premium and facing competition from multiple fronts, new investors may want to wait for a dip before buying.

That said, long-term investors holding Netflix stock may want to stay the course, as the company continues to demonstrate resilience and adaptability in the ever-evolving streaming market. 

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