Think the Netflix Growth Story Is Over? Here's Why the Streaming Stock Is a Must-Own in 2025.

Netflix (NASDAQ: NFLX) was one of the best stocks of the 2010s. After an initial misstep with Qwikster, Netflix successfully transitioned from a DVD-by-mail business to a streaming one and delivered phenomenal growth over the decade as it expanded around the world and made streaming mainstream.

In the 2020s, Netflix has faced new challenges, as nearly every legacy streaming platform launched its own streaming service, and Netflix growth stalled following a surge during the pandemic. That said, if you had bought the stock after it reported a decline in subscribers in Q1 2022, you would be up more than 400% assuming recent gains hold.

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Despite that surge, the stock seems to have been largely forgotten by growth investors, who shifted their focus to "Magnificent Seven" stocks and the artificial intelligence (AI) boom. However, Netflix just showed why the growth story is alive and well, and that the stock is a must-own in 2025.

Shares surged on its fourth-quarter earnings report, popping about 13% on Wednesday. Let's take a look at the highlights from the quarter before diving into the bull case for the stock this year.

Image source: Netflix.

Netflix smashes expectations

Following the slowdown in 2022, Netflix made a number of changes to return it to growth. It embraced advertising, launching a lower-priced advertising tier. It cracked down on password sharing with its paid sharing program, and it's begun experimenting with live events, hosting the Mike Tyson-Jake Paul fight in November and two NFL games on Christmas Day.

Those moves were successful and continued to grow the business. In the fourth quarter, the company added a whopping 18.9 million subscribers, well ahead of the 9.2 million analysts had expected, a new record for a single quarter. Revenue jumped 16% to $10.2 billion, beating estimates at $10.1 billion. The rest of its numbers impressed across the board, as operating margin improved from 16.9% in the quarter a year ago to 22.2%, and earnings per share (EPS) doubled to $4.27, topping the consensus at $4.20.

Management also said that its Q4 content outperformed its expectations, as the Paul-Tyson fight was the most-streamed sporting event ever, and its Christmas Day NFL games were the most-streamed NFL games in history.

A wide economic moat

Looking ahead to 2025, Netflix expects its steady growth to continue, calling for 14% to 17% currency-neutral revenue growth, and the nature of its subscription business model means that profits should grow even faster as content spending is expected to increase modestly from $17 billion to $18 billion, measured in cash. The company also plans to raise prices, including on its ad tier for the first time, which will also help drive margins up.

But the real reason that Netflix is once again a must-own for growth stock investors is that the company has so many different opportunities, and it is willing to take risks it refused to take just a few years ago.

Netflix is the clear leader in the streaming sector, putting up bonkers subscriber growth when many of its peers, like Walt Disney, are barely growing. And Netflix still has a lot of runways in its newest revenue streams, like advertising. Management identified improving its advertising product as a top priority for 2025 so that it can "substantially" grow ad revenue.

Live events are also a huge untapped opportunity for Netflix. Unlike any other platform in the world, it has the power to reach 300 million viewers directly, making it attractive to sports leagues and other live events looking for an audience.

It's also focused on growing its games business, and it's making progress. For example, Squid Game: Unleashed became the No. 1 free game in Apple's App Store, and it aims to make its games on all device types, not just mobile.

Why Netflix is a no-brainer buy in 2025

Beyond these opportunities the company is focused on, it also has other growth possibilities, such as product licensing, like Disney, and more real-world events, a theme with which it's experimented with the Bridgerton Experience.

Netflix sported strong subscriber growth in all four of its regions in the fourth quarter, as each one added more than 4 million subscribers in the quarter, showing it's growing rapidly around the world. Not only is the company executing perfectly, but the stock looks reasonably priced at a price-to-earnings ratio of 50, given its momentum.

After soaring in 2024, Netflix looks poised for another strong year in 2025 and should continue to dominate the streaming race for years to come.

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Jeremy Bowman has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Apple, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.