Netflix's Trillion-Dollar Baby Ambition: Realistic or Ridiculous?

Netflix (NASDAQ: NFLX), by far the world’s most dominant pure-play streaming stock, just had its eye-popping intentions revealed. A report from the Wall Street Journal says that the company is aiming to grow its market capitalization to $1 trillion by the year 2030.

Netflix would need to add a whopping $650 billion to its market cap over the next five years to achieve this goal.

This would mean adding value around four times the current market cap of one of its largest competitors, the Walt Disney Company (NYSE: DIS). This alone demonstrates the monumental task Netflix is undertaking. 

This analysis will examine what Netflix needs to do to achieve this target, both from a return standpoint and from a business perspective. Can this communications leader realistically attain membership in the $1 trillion club? This may not be as improbable as it initially sounds.

20% Return CAGR or Bust: Netflix’s Journey to $1 Trillion

Assuming Netflix aims to achieve this goal by the end of 2030, it would likely need to massively outperform the market. The S&P 500 Index has averaged around a 10% annual return since 1957. The stock would need to grow from its Apr. 23 closing market cap of about $447 billion to $1 trillion in roughly 4.5 years. That would require a nearly 20% compound annual growth rate (CAGR), or about double the S&P 500’s historical return. That’s close to the 19% CAGR Netflix stock delivered over the past 4.5 years, although returns tend to get harder as a stock grows.

However, size is by no means mutually exclusive from large returns. Take Magnificent Seven stocks Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), and Alphabet (NASDAQ: GOOG) for example. They have achieved return CAGRs of 25%, 23%, and 20%, respectively, over the last five years. An argument certainly exists that once a company achieves a level of size and dominance, it significantly increases its ability to expand its business. Companies of immense size have the ability to make huge bets that can result in massive payoffs. They can also exert their market power to destroy competitors. Overall, simply from a return viewpoint, Netflix’s $1 trillion mission by 2030 is a big hill to climb, but it is far from outside the realm of possibility.

Keys to $1 Trillion: Doubling Down on Global Growth and Ad Monetization

On the business side, Netflix has several key metrics it aims to hit to reach the imposing $1 trillion mark. It wants to add over 100 million new subscribers, growing to 410 million users from the current 302 million. Further expansion into countries like India and Brazil is one path Netflix sees to do this. These added subscribers will go toward doubling total revenues from $39 billion annually in 2024 to $78 billion in 2030. Within this, Netflix wants to grow its advertising sales to $9 billion annually.

Targeting India makes a lot of sense when it comes to growing subscriptions. It is the world’s most populous country, with nearly 1.5 billion people. Netflix already has a decent foothold there, with approximately 12 million subscribers. Experts expect the number of internet users in India to surpass 900 million in 2025. That points to a massive opportunity for Netflix, which remains significantly underpenetrated in the country. Making meaningful gains there could go a long way in helping Netflix reach its subscriber targets.

Netflix also has a huge ability to grow its advertising business. Data from eMarketer shows how U.S. adults spend nearly an equal amount of their time online using Netflix as they do on Meta’s apps and YouTube. However, Netflix accounts for less than 1% of total ad spending. Meanwhile, Meta raked in 21% of total ad spending, and YouTube saw over 5%. This highlights that while overall engagement on Netflix is strong, ad monetization remains low, presenting a significant revenue growth opportunity. The company’s new ad-tech stack, Ads Suite, should help drive monetization.

Although Netflix’s $1 trillion target may seem daunting when taken at face value, it's not as crazy as it sounds. The company has many ways to drive its stock higher, even outside of the avenues discussed above. When it comes to reaching a $1 trillion market cap, it makes sense not to count Netflix out.

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