Tech Stocks on Fire: What’s Driving the Rally?
The Nasdaq Composite has been on a remarkable upward trajectory for over two years, with no signs of slowing down. Several key factors have contributed to this rally, including decreasing inflation, falling interest rates, and rising corporate earnings. The advent of artificial intelligence (AI) has also played a significant role in driving growth.
A Bull Market with Room to Run
History suggests that the current bull market will continue, with the Nasdaq Composite delivering additional gains of 19% on average after achieving gains of 28% or more. Moreover, bull markets tend to last around five years, and the current rally has just passed its two-year anniversary, indicating that there’s still plenty of room for growth.
Netflix: The Unstoppable Stock
One stock that’s been defying expectations is Netflix. Despite being a pioneer in the streaming industry, Netflix has continued to surge, with a remarkable 1,740% growth over the past decade. In 2024, the company jumped 83%, nearly three times the gains of the Nasdaq, and it’s already outpacing the tech-centric index in 2025.
Recent Earnings Report: A Testament to Netflix’s Strength
Netflix’s recent fourth-quarter results were impressive, with revenue of $10.2 billion climbing 16% year over year and generating robust profitability as earnings per share (EPS) of $4.27 soared 102%. The company’s strong paid subscriber additions of over 18.9 million, surging 44%, marked its biggest quarterly increase in subscribers ever.
Management’s Forecast: A Bright Outlook Ahead
Management is guiding for first-quarter revenue of $10.4 billion, up more than 11%, while EPS of $4.23 would increase nearly 6%. The company also provided a robust full-year 2025 revenue forecast of $44 billion at the midpoint of its guidance, or growth of about 13%. Netflix increased its operating margin outlook to 29% for 2025, up from 27% in 2024, illustrating its ability to ratchet up profitability even as it generates robust growth.
Key Factors Driving Netflix’s Growth
Several factors contributed to Netflix’s out-sized growth in Q4, including the success of Squid Games 2, Carry-On, and the Jake Paul vs. Mike Tyson fight. The company’s expansion into video games, live streaming, and advertising also presents significant opportunities for future growth.
A Fair Price for a Company That Defies Expectations
With Netflix currently trading for roughly 36 times expected 2025 earnings, some might argue that the stock is expensive. However, given its strong track record of growth, I’d argue that’s a fair price for a company that consistently defies expectations. That’s why 2025 could be another banner year for Netflix shareholders.
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