Huge News for Netflix Stock Investors

Written by Brett Schafer for The Motley Fool

Earnings are important, and investors will keep focusing hard on revenue and profit as long as Netflix is a publicly traded company. However, Netflix will be making a little-discussed disclosure change in 2025 that could have a big impact on how investors look at the stock. Here's what comes next for Netflix, and whether the stock is a buy after the latest surge.

First, let's talk about Netflix's Q3 earnings. Revenue rose 15% year over year in the quarter to $9.8 billion, with operating margin expanding to 30% compared to 22.4% in the same period a year ago. This means Netflix's revenue is rising without it spending much more on content. Free cash flow (what's left of cash flow after capital spending) was solid at more than $2 billion in the period.

NFLX Operating Margin (TTM) data by YCharts

The change may irk some people, but it isn't the end of the world. What Netflix investors should focus on is what the company is doing to continue increasing revenue during the next five to 10 years. It looks to have a few tricks up its sleeve.

Second, Netflix is venturing into live events such as boxing matches, National Football League games on Christmas Day, and World Wrestling Entertainment offerings. Third, it is investing in mobile games and other forms of video games to boost engagement across the platform.

Before you buy stock in Netflix, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $845,679!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

*Stock Advisor returns as of October 21, 2024

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.