Netflix Stock Is Soaring: Is It a Buy, Sell, or Hold?

Key Points

• A handful of major catalysts are helping Netflix grow revenue by double-digit rates.

• The company's key growth drivers should remain meaningful tailwinds for the foreseeable future.

• The stock may not be as expensive as it initially appears.

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The bar is high as Netflix (NASDAQ: NFLX) prepares to release its second-quarter earnings this week. Scheduled to report the period's results after market close on Thursday, investors will be hoping the financials live up to the stock's pricey valuation after its big move higher this year. Shares have soared 42% in 2025 alone -- and that's on top of an 83% gain last year. In total, the stock has risen an incredible 160% since the beginning of 2024.

Of course, shares of Netflix have risen for good reason. The underlying business is firing on all cylinders. However, the stock's significant gains mean there's no room for error. So, here's what investors should know ahead of the streaming service specialist's earnings report this week. More importantly, we'll examine whether the stock appears to be an attractive investment at its current price.

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A handful of catalysts

One of the primary reasons Netflix has performed so well this year is that the stock has not just one but a handful of catalysts likely to drive strong growth for the company for the foreseeable future.

Starting with the company's nascent advertising business, management stated in its first-quarter update that advertising revenue is expected to roughly double this year. Of course, this business is still small relative to the company's overall business but management's optimism for this high-margin revenue stream is good news for shareholders.

Another major catalyst for the company (and shares) is Netflix's rapidly expanding operating margin. In the first quarter of 2025, for instance, it was 31.7% -- up from 28.1% in the year-ago quarter. Additionally, management is guiding for a full-year operating margin of 29%. This is up from 27% in 2024. The combination of double-digit revenue growth and operating expansion margin means earnings per share is growing particularly fast. To this end, Netflix's first-quarter earnings per share increased by more than 25% year over year, outpacing its 12.5% revenue growth during the period.

Finally, there's the catalyst of steady price increases. For years, Netflix has been able to repeatedly roll out price incresaes for its subscription plans, and customers have remained loyal. In fact, we'll see the benefit of some of the company's most recent increases when Netflix reports earnings this week. Management noted in its first-quarter letter to shareholders that it would benefit from a full quarter of year-over-year price increases during Q2.

Of course, Netflix's growth drivers don't end here. There's the company's foray into live events and gaming, as well as a continued crackdown on password sharing, too. All of these catalysts should help fuel double-digit revenue growth for years to come.

Shares aren't as expensive as they look

Given all of these significant catalysts, it's evident that the streaming service specialist stock deserves a premium valuation. But is its current price-to-earnings multiple of about 60 simply too high?

To determine whether shares are attractive today, consider how the company's growth drivers are reflected in Netflix's financials.

Starting with Netflix's top-line story, note that management said in its first-quarter update that it actually expected its revenue growth rate to be higher in Q2 than it was in Q1. Specifically, management guided for second-quarter revenue to rise at a rate of 15.4% year over year. This is up from 12.5% growth in the first quarter of 2025. Additionally, management guided for a spectacular operating margin of 33.3%, up from 27.2% in the year-ago period and 31.7% in the first quarter of 2025.

Putting the company's momentum into perspective, if Netflix delivers on its guidance for Q1, it will report earnings per share of $7.03, up 44% year over year. While shareholders obviously shouldn't expect bottom-line growth like this every quarter, guidance like this does help justify the stock's sky-high valuation.

Overall, I believe shares are a hold at their current price. The company's broad array of catalysts should help the company grow into its valuation. Of course, there's always a risk that the company's growth will slow more than expected. But given how many tailwinds the business is benefiting from, shares are probably worth holding for the long haul -- even at their current price.

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Daniel Sparks and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.