Should You Buy Netflix Stock Before July 17?

Key Points

• Netflix stock has been on fire over the past year, racking up gains of 91%,

• The company's multipronged strategy is paying off, fueling impressive revenue and profit growth.

• Netflix's upcoming financial report will mark a key test for the highflier.

When it comes to streaming video services, Netflix (NASDAQ: NFLX) requires little introduction. From its humble beginnings mailing DVDs to customers using its signature bright red envelopes, the company has become ubiquitous as the world's largest subscription-based streaming service.

Much to the delight of its shareholders, Netflix continues to find new ways to juice its revenue growth and resulting profits, even as it transitions to a more mature company. This innate ability has fueled its stock price, which has surged 614% over the past three years and 91% over the past 12 months.

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The company faces a key hurdle when Netflix reports its second-quarter results after market close on July 17. Given the stock's blistering run over the past year, should investors lay out their hard-earned money to get in on the action or wait until after this important financial report? Let's dig in to see what the evidence suggests.

Image source: Getty Images.

Will the hits keep coming?

One of the defining characteristics of Netflix has been management's uncanny ability to find new avenues for growth. In the wake of the pandemic and despite heavy market penetration, Netflix struck gold and reignited its growth with the release of its ad-supported tier in late 2022.

Similarly, the company defied detractors with a crackdown on password sharing. By offering users the opportunity to "share" their Netflix account with members outside their household for a nominal fee, the company struck a delicate balance between increasing revenue and alienating viewers.

This two-pronged strategy has yielded impressive results. In the first quarter, Netflix generated revenue of $10.5 billion, an increase of 13% year over year, resulting in earnings per share (EPS) of $6.61, which jumped 25%. Management credited higher subscription and ad revenue for fueling the results.

Netflix expects its growth streak to accelerate. For the second quarter, the company is guiding for revenue of $11.04 billion and EPS of $7.03, which would represent year-over-year growth of 15% and 44%, respectively. Wall Street is firmly onboard, as analysts' consensus estimates are calling for revenue of $11.04 billion and EPS of $7.06.

Opportunities abound

This isn't simply a pipe dream, either, as evidence suggests the company's "standard with ads" tier is driving robust growth. Earlier this year, Netflix revealed that monthly active users on its ad-supported tier soared to 94 million, representing 135% growth over the past year. The company also noted that the ad-supported tier attracted 55% of new subscribers in the countries where it's available.

Perhaps more importantly, the streaming giant said it reaches more 18-to-34-year-olds than any other U.S. broadcast or cable network. Furthermore, those viewers are highly engaged, watching an average of 41 hours of Netflix programming each month. This gives the company an increasing amount of leverage with advertisers and a massive opportunity in terms of future ad revenue.

Netflix has a strong slate of programming lined up for the second half of 2025. The company is releasing the latest additions to some of its biggest hits, including Stranger Things, Wednesday, The Sandman, Old Guard 2, and The Witcher. Of special note is Squid Game 3, which was released just last week and shattered the record, with 60.1 million views in the first three days of its release.

It's also worth noting that Netflix just forged a partnership with French broadcaster TF1, which will allow viewers to watch TF1 channels, live sports, and on-demand content directly on Netflix. This first-of-its-kind partnership could provide a template for the future of streaming.

Should you buy Netflix stock now, or wait until after earnings?

For investors wanting to capitalize on the ongoing demand for streaming, the future looks ripe with opportunity for the streaming video pioneer. This begs the question: Is it better to buy Netflix stock now, or wait until after the company reports earnings?

Those with a long-term investing outlook would be best served by simply buying the stock and resisting the temptation to time the daily machinations of the stock market. To be clear, there's simply no way to know what the quarterly results will actually be or how investors will react on a given day. As such, there's no way to know whether the stock will rise or fall following the company's financial report.

The underlying, and perhaps more important question, is whether Netflix stock is a buy -- and the evidence suggests there are plenty of reasons to be optimistic. Wall Street is also bullish, as 33 of the 50 analysts who offered an opinion in June rate the stock a buy or strong buy, and none recommended selling.

Management is equally optimistic. The company has an internal goal of doubling its revenue and tripling its ad revenue by 2030, according to a report in The Wall Street Journal. This would put Netflix in rarified company, nearly doubling its market cap to roughly $1 trillion. For context, there are currently only 11 companies with valuations that exceed that yardstick.

I'd be remiss if I didn't mention the stock's valuation, as Netflix is currently selling for 42 times next year's expected earnings. While that might seem steep, I'd suggest it's a fair price to pay for profit and revenue growth of this caliber.

Given the company's track record of success, robust growth, the vast opportunity ahead, and its strong slate of programming, the evidence suggests Netflix stock is a buy.

Should you invest $1,000 in Netflix right now?

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Danny Vena has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.