The S&P 500 is up 22% this year, which is more than twice its average annual return since it was established in 1957. The index continues to set new record highs, cementing the bull market that began in October 2022.
The technology sector is leading the broader market higher, and it isn't just artificial intelligence stocks. Shares of streaming giant Netflix (NASDAQ: NFLX) are up a whopping 54% year to date, thanks to a string of blockbuster quarterly reports showing rapid subscriber and revenue growth.
Netflix just reported its latest financial results for the third quarter of 2024 (ended Sept. 30), and they comfortably beat Wall Street's expectations. Here's why the stock could be the ultimate long-term bull market buy.
Wall Street estimated that Netflix would add 4.5 million new subscribers during the third quarter, but the actual number came in at almost 5.1 million. The company now has 282.7 million total subscribers, making it the largest streaming platform in the world by a wide margin -- Disney's Disney+ is a distant second with 153.8 million.
Netflix's advertising tier accounted for half of all new signups during Q3 (in countries where it's available), and the total ad-tier subscriber base grew by 35% from just three months earlier. Priced at just $6.99 per month, Netflix with ads was designed to attract new users who don't want to pay for the Standard tier ($15.49 per month) or the Premium tier ($22.99 per month).
The ad tier was launched in late 2022, so it's still very early. Netflix is focused on acquiring signups because businesses will pay premium rates for ad slots only if they can reach a large enough audience. For that reason, Netflix's ad inventory is currently growing faster than the company's ability to monetize it, and it could be a couple of years before demand outstrips supply. Netflix does expect advertising revenue to double in 2025, although from a relatively small base in 2024.
Netflix generated a record $9.8 billion in total revenue during Q3, a 15% increase from the year-ago period. That growth rate marked a modest sequential deceleration (from 16.8% in the second quarter), but advertising could be the secret to faster revenue increases over the long term. That's because businesses are forecast to spend over $60 billion on television advertising during 2024 in the U.S. alone (according to Statista), which is a huge opportunity for Netflix to grow into.
Engagement is one of the keys to growing advertising revenue. The longer each ad-tier subscriber spends streaming content, the more ads they will see, which translates to more revenue for Netflix. At the moment, members spend an average of around two hours watching Netflix every day, but live programming has the potential to boost that number.