Netflix Stock Is Crushing the Market. Time to Buy?

Core Viewpoint - Following a strong earnings report, Netflix's stock has surged over 22% year-to-date, significantly outperforming the S&P 500's decline of nearly 7% [1] Group 1: Financial Performance - In the first quarter, Netflix's revenue grew by approximately 12.5% year-over-year, while operating income increased by 27.1%, both exceeding management's guidance [3] - Management anticipates second-quarter revenue growth of 15.4% year-over-year, an acceleration from the first quarter's growth rate [7] - Operating margin is expected to expand to 33.3% in the second quarter, up from 27.2% in the same period last year [7] - Forecasts indicate a 41% year-over-year increase in operating income for the second quarter of 2025 [8] Group 2: Advertising Business - Netflix's advertising business is seen as a significant growth opportunity, with expectations for advertising revenue to "roughly double" this year [4] - The small size of the advertising business relative to overall sales provides some insulation against macroeconomic uncertainties [4][5] Group 3: Share Repurchase and Valuation - The company has aggressively repurchased shares, spending $3.7 billion in the first quarter, significantly more than the$800 million used to pay down debt [6] - Current valuation stands at a price-to-earnings multiple of 52, reflecting strong earnings momentum and growth potential [9] - High valuation may limit room for risks, suggesting that investors might consider waiting for a better entry point [10] Group 4: Investment Recommendation - For existing shareholders, the positive updates from Netflix provide reasons to hold the stock despite its high valuation [11] - There is no compelling reason to sell at this time, placing shares in a hold recommendation [11]