Image Source: Unsplash

Following an earnings and sales beat, Netflix (NFLX - Free Report) stock is trading marginally lower. The primary factor dragging the stock down seems to be the weakening stock indexes because the quarterly earnings report from Netflix was quite exceptional.

Revenue in the quarter grew 17% YoY to $9.37 billion, while operating margins expanded from 22% to 27%. Especially impressive was the growth in the ads tier membership, which increased subscribers by 34% QoQ. With the expansion into live content, management expects even more opportunities to expand its ad business.

Currently, Netflix enjoys a Zacks Rank #2 (Buy) rating along with a reasonable valuation, leading me to believe that today’s selloff offers an opportunity to consider owning the stock. Netflix stock has considerably outperformed the broad market thus far in 2024.

Image Source: Zacks Investment Research

Netflix Dominates the Streaming Market

In the report, the company shared a graphic from Nielsen that demonstrates just how much viewers consume Netflix’s streaming service.

From the report: According to Nielsen, streaming accounts for 40% of total TV time in the US today, with Netflix and YouTube the clear leaders in direct-to-consumer entertainment. Collectively our two services account for almost half of all streaming TV watch time in the US.

In H1 2024 (and despite headwinds from paid sharing) Netflix generated more view hours in the Nielsen Top 10 across film, series and licensed titles than all the other streamers combined.

This shows Netflix’s clear edge over competitors Amazon (AMZN - Free Report), Disney (DIS - Free Report) and other streaming competitors. Although Amazon and Disney continue to expand offerings like Netflix, there are none who are quite so impressive at the streaming maverick.

Image Source: Netflix

Netflix Boasts a Fair Valuation

As of today, Netflix is trading at a very reasonable valuation considering its dominant role in the streaming industry and impressive growth prospects.

The company is trading at a one year forward earnings multiple of 35.1x, which is well below its five-year median of 40.6x and above the broad market average.

EPS are forecast to grow 25.3% annually over the next three to five years.

diImage Source: Zacks Investment Research

Bottom Line

Netflix's impressive earnings report, highlighted by strong revenue and earnings growth, expanded margins and accelerating subscriber additions, underscores its dominant position in the streaming landscape.

While the broader market's weakness has temporarily pushed the stock lower, the company's robust performance and reasonable valuation make it a compelling investment opportunity. The potential for continued growth, driven by factors like ad revenue expansion, live content and other new content offerings, further strengthens Netflix's investment case.

Investors seeking exposure to the thriving streaming sector should seriously consider adding Netflix to their portfolios.

More By This Author: