Reaching a trillion-dollar valuation is a milestone that only a small cohort of companies have ever achieved. Currently, there are seven publicly traded companies with a market capitalization of more than $1 trillion. Those companies are:
Apple: $3.5 trillion
Nvidia: $3.4 trillion
Microsoft: $3.2 trillion
Alphabet: $2 trillion
Amazon: $1.9 trillion
Metaplatforms: $1.4 trillion
TaiwanSemiconductor production: $1 trillion
In addition to the above companies, electric vehicle company Tesla and Warren Buffett’s financial juggernaut, Berkshire Hathawayhave also had fleeting memberships in the trillion-dollar club in previous periods.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
With the exception of Berkshire, all the other companies that have managed to reach a trillion-dollar valuation have two things in common: they’re all a technology company, and they’re all fueling the artificial intelligence (AI) revolution. While I suspect other AI capabilities could one day become a trillion-dollar stock, I see another company as a more likely candidate in the near term.
Below I will explain why Netflix(NASDAQ:NFLX) is my top pick for the first non-AI tech company to reach a trillion-dollar valuation.
In recent years, the streaming landscape has become increasingly crowded. As viewers continue to cut the cord with existing cable providers, networks are being pressured to derive growth from other options. One of the most widely adopted strategies is for networks to move original content to their own streaming platforms.
While such an approach gives viewers additional options when it comes to consuming content, I think people have become overwhelmed (and perhaps annoyed) by all these new services. In other words, I wouldn’t be surprised if the average television fan has at least signed up and tried out newer services like Peacock and Paramount+. My question is: how long do these new users usually stay? My guess is not long.
According to a study published by Big Four accounting firm EY, the “average streaming household” subscribes to five platforms. But that said, two-thirds of subscribers have canceled some of their services in the past year; 37% of respondents say some of these services are not used.
But despite the fierce competition for viewers and attention, one platform stands out from the rest. With 283 million subscribers worldwide, Netflix has built formidable scale, well ahead of any competing service.
While much of the company’s growth to date has come from its extensive library that includes both original content and some of the entertainment industry’s most beloved television and film franchises, other opportunities on the horizon could mean a whole new wave of growth for Netflix .
Image source: Getty Images.
During the third quarter (ended September 30), Netflix added 5.1 million new subscribers – far exceeding Wall Street expectations. One of the driving forces behind this growth can be traced back to the company’s new advertising tier.
A few years ago, Netflix introduced a cheaper subscription offering that included ad breaks while watching a show or movie. According to management, advertising plan membership grew 35% year over year in the third quarter.
While this growth is encouraging, management told investors that advertising is not expected to be “the primary driver of our revenue growth in 2025.” Considering Netflix’s revenues are already growing 15% year over year, I find the future benefits of advertising particularly optimistic.
Another opportunity that I think will pay off for Netflix is the introduction of its immersive experiences called Netflix House. To be clear, I don’t think Netflix House will make much money for the company – at least not immediately.
But in a similar vein to Disney World, I think bringing fans of Netflix’s hit shows to an immersive world where they can experience content in a different way will help strengthen the company’s brand loyalty. To me, Netflix is evolving into a more complete entertainment company that wants to connect with its users in addition to streaming videos.
For the full year 2024, Netflix management expects total revenue of approximately $38.8 billion. Additionally, during its third-quarter earnings guidance, management said revenue should be between $43 billion and $44 billion in 2025 – or about 11% annualized.
Assuming a growth rate of 11% for the next ten years, Netflix would generate revenues of $96.2 billion in 2033. Using the company’s current price-to-sales ratio (P/S) of 8.8, I would arrive at a market cap of $847 billion. towards the end of my forecast period.
This is indeed lower than my trillion dollar prediction. But the point is that predicting Netflix’s revenues so far into the future is quite challenging, as investors don’t have much insight into what the initiatives around advertising and Netflix House could yield.
In my opinion, Netflix House will help the company maintain its subscriber base while opening a new door to acquire new viewers. For this reason, I think Netflix House’s real opportunity is to improve its Customer Lifetime Value (LTV) mechanisms. Additionally, I see the advertising option as one that should help entice viewers to stay on the platform at a lower cost compared to other streaming alternatives.
As such, I think Netflix will see both accelerated revenue and operating profit in the coming years. Should Netflix start generating higher margins and industry-leading economics from its subscriber base, I think there’s a good chance the company’s valuation multiples could increase significantly.
For this reason, I see Netflix as a likely candidate to join the trillion dollar club in the coming years.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: If you had invested $1,000 when we doubled in 2010, you would have $21,154!*
Apple: If you had invested $1,000 when we doubled in 2008, you would have $43,777!*
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $406,992!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 28, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Netflix, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Prediction: This will be the first non-artificial intelligence (AI) tech company to reach a $1 trillion valuation originally published by The Motley Fool
