Thanks partly to our unique system of franking, as well as some good old fashioned love of country, it's fair to say that ASX investors have a strong local bias.

When we do branch out to invest beyond our shores, it is usually a direct flight to the US markets. As I've written here before, the US is, as it should be, the first port of call for ASX investors seeking international diversification. No one can deny that the US is home to the vast majority of the world's best and most dominant businesses. No other country's share market constituents can match the size, scope and scale of top US stocks like Amazon, Alphabet, Microsoft, Netflix, Mastercard, Procter & Gamble, Apple, and countless others.

However, that doesn't meaning investing in US stocks isn't without risk. The US-Iran war that has been raging all month proves that. As such, I think the prudent investor might wish to consider diversifying beyond just Australia and America. The easiest way to do this, by far, is by using exchange-traded funds (ETFs).

Let's go through some of the best options for stocks outside Australia and the US.

3 ASX ETFs that can help diversify a portfolio

First up, there's the Vanguard All-World ex-US Shares Index ETF (ASX: VEU). This ETF, as its name implies, throws a whole bunch of different countries' stock markets together, with the notable exception of the US. The largest contributors to VEU's portfolio include Japan, the United Kingdom, China, Canada, India, and Taiwan. A healthy mix of advanced and developing economies there. ASX do feature in this ETF as well, although they make up just 4.3% of the entire portfolio.

Another option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). VGE focuses exclusively on emerging economies, so you won't find European, British or Japanese stocks here. Instead, VGE's largest contributors are countries like China, Taiwan, Brazil, South Africa and Saudi Arabia.

Finally, investors can consider the iShares MSCI EAFE ETF (ASX: IVE). This fund covers markets from Europe, Asia and the Far East (EAFE). It offers exposure to countries ranging form Japan, Spain and the UK to Germany, Singapore and Israel. Again, Australia is included as well, but contributes just over 6% to IVE's holdings.

Foolish takeaway

All three of these ASX ETFs offer Australian investors an easy way to add exposure to stocks from Europe, Asia and Africa to their portfolios. These regions are under-represented in the vast majority of ASX portfolios, and can help insulate investors from adverse movements on the American or Australian markets.

The post These 3 ASX ETFs can help protect your portfolio in 2026 appeared first on The Motley Fool Australia.

With more than $8 billion in assets under management, QUAL is currently the fifth most popular ASX ETF on our markets. It comes in behind the Vanguard Australian Shares Index ETF (ASX: VAS), the Vanguard MSCI Index International Shares ETF (ASX: VGS), the iShares S&P 500 ETF (ASX: IVV) and the BetaShares Australia 200 ETF (ASX: A200).

Unlike those four ETFs, though, QUAL isn't a market-wide index fund that blindly invests in companies according to their market capitalisation, with few other considerations.

Instead, it tracks an index that actively screens companies to identify their quality. These screens include factors like a stock's return on equity, earnings stability and financial leverage.

After applying these screens to a range of internationally listed shares, the VanEck International Quality ETF settles on a portfolio of around 300 different stocks, hailing from more than a dozen different countries. These countries range from Switzerland, Japan and the United Kingdom to China, Denmark and Ireland.

However, the vast majority of QUAL's portfolio is drawn from the United States of America, which commands more than three-quarters of this ETF's weighted holdings.

So, let's get into what you're actually buying when purchasing QUAL units in 2026.

QUAL: What's in this ASX ETF's box?

Here are the current top ten holdings of the VanEck International Quality ETF, as well as their respective weightings in the QUAL portfolio:

1. Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) at 5.67% of the total QUAL portfolio
2. Meta Platforms Inc (NASDAQ: META) at 5.02%
3. NVIDIA Corporation (NASDAQ: NVDA) at 4.64%
4. Apple Inc (NASDAQ: AAPL) at 4.62%
5. Microsoft Corporation (NASDAQ: MSFT) at 4.46%
6. Eli Lilly & Co (NYSE: LLY) at 3.44%
7. Visa Inc (NYSE: V) at 2.92%
8. ASML Holding N.V. (AMS: ASML) at 2.52%
9. Johnson & Johnson (NYSE: JNJ) at 1.86%
10. Walmart Inc (NYSE: WMT) at 1.77%

Some other significant QUAL holdings include Mastercard Inc (NYSE: MA), Netflix Inc (NASDAQ: NFLX), Costco Wholesale Corp (NASDAQ: COST) and Caterpillar Inc (NYSE: CAT).

Not only does this list reveal how dominant the US is in this ASX ETF, but it shows how similar its holdings are to a broad-market US index fund like the iShares S&P 500 ETF. We discussed that ETF just the other day, so check out how its holdings compare to QUAL's here.

This methodology seems to have worked quite well for the VanEck International Quality ETF, though. As of 31 December, QUAL units have returned an average of 14.8% per annum over the past ten years, and 22.85% per annum over the past three. It will be interesting to see if this performance keeps up in 2026.

This ASX ETF charges a management fee of 0.4% per annum.

The post Investing in the VanEck International Quality ETF (QUAL)? Here's what you're really buying appeared first on The Motley Fool Australia.

• Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
• REA Group Ltd (ASX: REA)
• MFF Capital Investments Ltd (ASX: MFF)
• Wesfarmers Ltd (ASX: WES)
• TechnologyOne Ltd (ASX: TNE)

My US picks were:

• Amazon.com Inc (NASDAQ: AMZN)
• Doulingo Inc (NASDAQ: DUOL)
• S&P Global Inc (NYSE: SPGI)
• Costco Wholesale Corp (NASDAQ: COST)
• Mastercard Inc (NYSE: MA)

Obviously, not much has changed in a week, and I would still love to own more of all ten of these companies in 12 months' time.

But we're not stopping wth those stocks. Today, let's discuss ten more stocks that I think anyone can buy today to start 2026 off on a strong note. We'll once again do five ASX shares and five US stocks.

5 top ASX shares to kick off 2026 with a bang

I love consumer staples companies, and Coles Group Ltd (ASX: COL) is one of my favourites here on the ASX. Coles is a strong dividend payer with a defensive and mature earnings base that can provide protection against both recessions and inflation. It will, in my view, be around for decades to come.

Telstra Group Ltd (ASX: TLS) is another veteran ASX stock I like for 2026. Its dominance of the defensive mobile and internet markets gives it a strong moat and, thus, a reliable dividend. This company's fully-franked payouts are historically some of the best on the ASX.

Turning to a faster-growing company now, Xero Ltd (ASX: XRO) is another top stock looking interesting as we start the new year. Xero has a remarkably sticky product in its cloud-based accounting software. Consumers seem willing to keep paying those monthly fees to use Xero's platform. The company's growth plans are very exciting too.

JB Hi-Fi Ltd (ASX: JBH) is our fourth pick of the day. JB has proven itself to be one of the ASX's best retailers, having savvily evolved from selling hi-fi products to becoming an all-out electronics and appliances retailer over the past two decades. Customers love JB's distinctive marketing tactics and innovative store layouts. With JB having a rare lacklustre year in 2025, this one is looking tempting as we start 2026.

Our final ASX stock worth discussing today is more left-field. It is the gold miner Newmont Corporation (ASX: NEM). Normally, I shy away from more speculative investments like Newmont. But Newmont can be viewed as an insurance policy of sorts. If 2026 produces geopolitical or economic uncertainty on the global stage, Newmont could benefit from a rush to the 'safe haven' of gold. If some experts are to be believed, it could have another bumper year in 2026.

5 top US stocks to check out too

When I named Mastercard as one of my top US picks last week, it was partly due to my conviction that contactless and electronic payments are in the middle of a powerful long-term tailwind. That's why I am also happy to own and spruik Mastercard's arch-rival Visa Inc (NYSE: V). Visa is the largest payments company in the world, and is an extraordinarily profitable stock. However, I think its best days lie ahead.

We can say the same for Magnificent Seven winner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). Google-owner Alphabet owns several of the world's best businesses. These include Google Search, YouTube, Google Cloud, and AI-platform Gemini. I'm also excited about the company's self-driving division.

I would be happy to own Alphabet's Magnificent 7 sibling, Microsoft Corp (NASDAQ: MSFT), too. Buying Microsoft stock means buying a share in Windows, Office, Xbox, Teams, Activision Blizzard, LinkedIn, and many other leading digital products and services that Microsoft owns. I rest my case.

Netflix Inc (NASDAQ: NFLX) is another winner that I think will keep on winning. If Netflix manages to acquire the assets of Warner Bros Discovery Inc (NASDAQ: WBD) this year, it will own one of the most extensive and valuable collections of intellectual property on the planet. Even if it doesn't, Netflix owns a service that is well on its way to becoming an internationally recognised household essential.

Our final stock is a simple one that we all know and may love. McDonald's Corporation (NYSE: MCD) is one of the most resilient businesses in existence. Its brand is universally recognised, having transcended into popular culture decades ago. As an inflation and recession-resistant stock, I'd be happy to buy more McDonald's this January.

The post My 10 top stocks to buy to start the New Year off right appeared first on The Motley Fool Australia.

The good news is that exchange-traded funds (ETFs) remove much of that pressure and offer a simple way to invest.

With a single investment, you can gain instant diversification and exposure to hundreds or even thousands of companies.

For Australians starting their investing journey in 2026, here are five ASX ETFs that stand out as sensible, beginner-friendly options.

Vanguard Australian Shares ETF (ASX: VAS)

The Vanguard Australian Shares ETF is often considered a cornerstone ETF for local investors. It provides exposure to the 300 largest shares listed on the ASX, making it an easy way to invest in the Australian economy as a whole.

Its portfolio includes blue-chip names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), and Wesfarmers Ltd (ASX: WES). For beginners, this fund offers simplicity, diversification, and a steady stream of income over time.

iShares S&P 500 ETF (ASX: IVV)

If you want global exposure without complexity, the popular iShares S&P 500 ETF is a strong place to start. It tracks the S&P 500 Index, giving investors access to 500 of the largest stocks in the United States.

Holdings include Microsoft Corp (NASDAQ: MSFT), Apple (NASDAQ: AAPL), NVIDIA Corp (NASDAQ: NVDA), Johnson & Johnson (NYSE: JNJ), and Visa Inc (NYSE: V). For beginners, this fund offers exposure to some of the world's most profitable businesses with a single, low-cost investment.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF could be worth considering. It is designed for investors who want broad international diversification beyond Australia. It invests across developed markets such as the United States, Europe, and Japan.

Its holdings include companies like Alphabet Inc (NASDAQ: GOOGL), Nestlé (SWX: NESN), Toyota Motor Corp (TYO: 7203), and LVMH Moët Hennessy Louis Vuitton (FRA: MOH).

Betashares Australian Quality ETF (ASX: AQLT)

The Betashares Australian Quality ETF takes a quality-focused approach to Australian shares. Rather than simply tracking the biggest companies, it targets businesses with strong balance sheets, reliable earnings, and solid cash flow.

Top holdings include Telstra Group Ltd (ASX: TLS), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB), and Woodside Energy Group Ltd (ASX: WDS). This ETF could suit beginners who want a more selective take on the local market. It was recently recommended by analysts at Betashares.

Betashares Nasdaq 100 ETF (ASX: NDQ)

Finally, the Betashares Nasdaq 100 ETF adds a growth tilt to a beginner portfolio by tracking the Nasdaq-100 Index. It provides exposure to innovative companies shaping technology, healthcare, and consumer trends.

Holdings include Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), and Netflix (NASDAQ: NFLX).

The post 5 fantastic ASX ETFs for beginners in 2026 appeared first on The Motley Fool Australia.

Both Netflix (NASDAQ: NFLX) and Spotify (NYSE: SPOT) had great starts to 2025, but investors soured on the streaming giants in the back half of the year. Shares of both have fallen between 25% and 30% since midyear as poor earnings results have weighed on the stocks.

But with the drop in price for each stock, investors may have an opportunity to scoop up shares of a great company at the forefront of a long-term growth trend in streaming media. One of the streaming companies stands out as a great opportunity heading into 2026. 

What's weighing on each stock?

Shares of Spotify began to fall after the company released its second-quarter earnings results, which showed a worsening operating margin and negative earnings per share. It course corrected somewhat in the third quarter, but CEO Daniel Ek announced he was stepping down and the company provided weak fourth-quarter guidance, sending the stock lower.

Netflix stock also sold off after its second-quarter earnings due to management's disclosure that its strong financial results and outlook were driven by improvements in foreign-exchange rates rather than increased engagement or willingness to pay from consumers. The sell-off accelerated after a one-time Brazilian tax weighed on third-quarter results. More recently, Netflix's proposed acquisition of Warner Bros. Discovery has pushed shares lower, as investors see regulatory and operational challenges for the merger.

To be sure, neither company is showing significant weaknesses. However, with both stocks priced for strong and continuous growth, any minor hiccup can lead to investors losing confidence in the company's value and selling their shares. A company with a strong competitive advantage is better equipped to weather setbacks and overcome financial challenges, as its operating results ultimately prevail in the long run. I believe one of these companies has a greater competitive advantage that should enable it to produce strong long-term results and could allow the stock to bounce back quickly in 2026.

Which company has a wider moat?

One of the biggest indicators that Spotify and Netflix have competitive advantages in the market is that they've both been able to increase prices. Spotify made two pricing changes in the United States in 2023 and 2024, and another price increase could be on the way next year. Netflix, meanwhile, has consistently raised prices since 2014.

Spotify currently charges a premium relative to competitors, but it also includes additional content with the price. Specifically, premium subscribers can listen to 20 hours of audiobooks each month. Differentiated content is key for the streaming service to stand out from the pack.

But acquiring differentiated content in music streaming is practically impossible. Every service has access to the same 100 million songs, and they all pay the record labels relatively standard royalties for access to their libraries. That means that Spotify doesn't have a clear advantage in content, and it doesn't have a lot of leverage on its content costs. That will limit its margin expansion over time.

By comparison, Netflix has built a differentiated library of unique content on its platform through a combination of original productions and exclusive licensing agreements. As the largest video streaming service, it can afford to spend more money on productions and licensing agreements for key content, as it amortizes those costs over a larger number of subscribers. It doesn't pay a fee every time someone streams a show like Spotify. As a result, it's able to produce meaningful margin expansion over time.

Netflix historically sets a target operating margin at the start of the year. With its highly predictable subscription revenue, it's able to manage its content spending to come very close to its target in normal circumstances. Despite the Brazilian tax it paid last quarter, management's full-year outlook still calls for its operating margin to expand 1.6 percentage points for the year. Spotify has less room to control costs and expand its margins.

A better value

The market prices Netflix stock at a much more attractive valuation than Spotify, with shares trading hands at less than 30 times analysts' consensus estimate for 2026 earnings. Spotify shares, by comparison, will cost closer to 50 times 2026 estimates.

That said, analysts expect Spotify to deliver strong earnings growth over the next few years. But with its high valuation, any revision in those estimates lower could cause the stock to pull back further. Netflix might not have the same expected earnings per share growth, but investors can have more confidence in the company hitting those targets. Strong execution in 2026 should push the stock price back toward its all-time high and beyond.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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It isn't always obvious that a growth stock will take off and generate massive returns for your portfolio. However, that's one of the reasons why sometimes taking a chance on an up-and-coming stock can be a worthwhile move, even if you're not entirely confident that it'll be successful. Taking on some risk can result in monstrous gains and rewards later on.

Three stocks that have made long-term investors rich over the past two decades include Nvidia (NASDAQ: NVDA), Netflix (NASDAQ: NFLX), and Booking Holdings (NASDAQ: BKNG). Here's a look at just how much your investment would be worth if you bought $5,000 worth of shares in each of these companies 20 years ago.

1. Nvidia: $3 million

The least-surprising stock on this list is likely Nvidia. The chipmaker has made people rich over just the past five years, let alone 20. If you invested $5,000 into the tech stock back on Dec. 1, 2005, your investment would be worth a staggering $3 million right now.

Today, Nvidia has become the most valuable company in the world, with a market cap of $4.5 trillion. A couple of decades ago, it was primarily known for its graphics cards. Nowadays, its cutting-edge chips are used in the development of artificial intelligence (AI) models, which has led to game-changing results for the business.

Over the past four quarters, the company has generated $187 billion in revenue. Just a few years ago, the company's annual revenue was less than $30 billion. Nvidia's gains have come rapidly, and for investors who want exposure to artificial intelligence (AI), this can be one of the safer stocks to hang on to for the long haul.

2. Netflix: $1.2 million

Another stock that would have made you rich over the past 20 years is streaming giant Netflix. A $5,000 investment a couple of decades ago would now have ballooned to be worth $1.2 million. Its ascent has been more gradual than Nvidia's, and there have been challenges along the way. However, Netflix has established itself as a leader in video streaming.

The company's relentless pursuit of growth is evident with its recent acquisition attempt of Warner Bros. Discovery for $72 billion. Although the deal may not end up going through, as Paramount Skydance has announced a hostile bid, and there are concerns about whether this may hurt competition, it's yet another example of Netflix looking for ways to grow and add value for its customers.

The streaming giant has gone from posting losses to now enjoying strong profit margins of 24%. Netflix is a household name and yet another good growth stock to hold for the long haul.

3. Booking Holdings: $1.1 million

Rounding out this list of impressive stocks is Booking Holdings. A $5,000 investment in the business 20 years ago would now be worth around $1.1 million. The growth in the travel industry, particularly in online bookings, has enabled it to grow at an incredible pace.

Last year, it reported $23.7 billion in sales and $5.9 billion in profit, a significant improvement from the $11 billion in sales it posted just three years earlier, when its bottom line was around $1.2 billion. Analysts from Grand View Research project that the online travel booking market is still growing at a compounded annual growth rate of roughly 10% until 2030, as there's still more growth potential ahead for Booking Holdings.

Given the plentiful opportunities ahead, it may still not be too late to invest in Booking Holdings stock. It trades at a forward price-to-earnings multiple of 21, based on analyst expectations. That's slightly below the S&P 500 average of 22. For long-term growth investors, this can be a fantastic investment to simply buy and hold. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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To illustrate, the iShares Core S&P/ASX 200 ETF (ASX: IOZ), a simple ASX 200 index fund, has returned 12.97% per annum since 31 October 2022.

The US markets have done far better, though. The iShares S&P 500 ETF (ASX: IVV) has returned an average of 21.4% over that same timespan. That's exceptional, given that this index's long-term average is about 7.5% per annum.

However, there is one ASX ETF that has put these funds to shame.

It is known as the Global X FANG+ ETF (ASX: FANG).

Over the three years to 31 October, this ASX ETF has delivered not a 20% or 30% return per annum. Not even 40%.

Its average rate of return has been an astounding 54.24% per annum. This astronomical rate of return would have been enough to turn $10,000 into roughly $36,700 over that three-year span.

So how has this high-flying ASX ETF done it?

FAANGing to the top

Well, FANG is a fund that only holds ten stocks within it. By contrast, the ASX 200 ETF holds, well 200, and the S&P 500 fund, 500.

Those ten stocks are special, though. As you can probably gather from the name, they include all five members of the old 'FAANG' club – Facebook (now Meta Platforms), Apple, Amazon, Netflix and Google (now Alphabet).

In addition to these five stocks, FANG also holds Broadcom, CrowdStrike, NVIDIA Corp, ServiceNow and Microsoft.

Microsoft and NVIDIA are members of the 'Magnificent 7' club that FAANG has morphed into. Meanwhile, Broadcom is a chipmaker and software stock. ServiceNow operates in the cloud-based business software space, and Crowdstrike is a leader in cybersecurity.

As you can imagine, all of these companies have enjoyed a phenomenal few years, thanks to the boom in interest in AI-related companies.

To illustrate, Broadcom stock is up approximately 645% since early December 2022. Some other notable winners include Crowdstrike (up 311%), Meta Platforms (up 425%) and, of course, NVIDIA (up a massive 948.5%).

Given that all ten of these FANG stocks have been unbridled winners, it's no surprise to see the ETF deliver such breathtaking gains.

So is this ASX ETF a screaming buy?

Well, that's the trillion-dollar question. There's no doubt that FANG's ten holdings are some of the best and most profitable companies in the world, and many will probably continue to be for years to come. However, that doesn't mean this ETF will continue to grow at 50%-plus every year going forward. A majority of its holdings are now worth more than US$1 trillion, and in many cases, far higher than that. There comes a point when companies simply cannot sustain growth rates due to sheer size.

This ETF is also heavily exposed to the US tech sector. It is highly concentrated and may be punished if the now-positive sentiment turns against tech shares.

It is difficult to judge what kind of future this ASX ETF holds in store for its investors. I would be surprised if it continues to see anything close to its recent blazing performance in the years ahead. But then again, it's not hard to make the case that it represents a stake in some of the world's top businesses. Investors should keep in mind that FANG represents a very narrow bet on a narrow range of companies, and judge the risks and potential rewards for themselves.

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It's been a week now since Netflix (NASDAQ: NFLX) stock split its stock 10-for-1, transforming a $1,125-per-share stock into a $112.50-per-share stock in the blink of an eye -- but doing absolutely nothing to change the business. And do you know what? During that week, Netflix stock haas gotten even cheaper, falling from $112.50 to close at $110 on Monday, and continuing to fall to just $104 and change today. 

And there's still no substantive reason for this.

Netflix stock just got cheaper.

What does this mean for you, the investor? Well, let's review. In 2016, Netflix shares cost even more than they do today -- about $115 pre-split. But Netflix was earning a lot less than it is today. Full-year profit was about $187 million in 2016, or about $0.04 per share.

Nine years later, Netflix stock once again costs just a little over $100 per share (post-split, though, so it's really up about tenfold in price). Yet Netflix earned $39 billion last year, or $1.98 per share. That's 50 times more profit today, on a stock that costs only 10 times more.

So effectively, for every $1 you invest in Netflix today instead of nine years ago, you're earning five times more profit. That sounds like a pretty good deal to me. What's more, with the stock falling 7% in price over the past week, this deal is getting even better!

Long story short, if you didn't take advantage of Netflix's bargain price after its stock split, last week, there's still time to do so. Granted, you still need to decide for yourself whether Netflix stock is worth its valuation, currently 42.5 times trailing earnings, with a long-term expected growth rate of 25%. But if you do think Netflix stock is a "buy," then no, it's not "too late" to buy at all.

Indeed, you just got rewarded for waiting... with an even better stock price.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Netflix's 10-for-1 stock split: Time to buy before it's too late? appeared first on The Motley Fool Australia.

Netflix continues to dominate the streaming landscape

Market expectations are high

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy Netflix before 2026? appeared first on The Motley Fool Australia.

It's been an exciting year for Netflix (NASDAQ: NFLX) investors. Despite rising competition from other platforms -- including Disney, Alphabet's YouTube, Amazon Prime, and Apple -- Netflix has proven that its content remains king in the streaming realm.

For the last several quarters, the company has demonstrated its ability to consistently acquire new subscribers while also maintaining existing customers. This combination has fueled record levels of revenue and earnings growth. It's not surprising that investors have been cheering on Netflix throughout 2025 -- sending its share price well above $1,000.

With so much momentum fueling the stock, many on Wall Street have been anticipating that Netflix would announce a stock split. These wishes became reality, as Netflix recently announced that a 10-for-1 split is set to occur later this month.

Let's explore how stock splits work, and assess why now looks like a no-brainer opportunity to pounce on Netflix stock before the split goes into effect on Nov. 17.

What is a stock split and how does it work?

Stock splits sound like some advanced financial jargon, but they are actually quite easy to understand.

During a split, a company increases the number of outstanding shares by the stated ratio. In the case of Netflix, this means the company's share count will rise by a factor of 10. Given the higher number of outstanding shares, Netflix's stock price naturally "falls" by the same multiple.

If Netflix were to complete its stock split today (Nov. 6), the company's share count would rise from 423,732,334 to 4.2 billion and its share price would decrease from $1,092 to about $109. Given these dynamics, a stock split does not inherently change the market capitalization of a company. In essence, stock splits are merely a form of financial engineering.

One of the biggest factors that influences a company to pursue a stock split is that the "lower" share price is perceived as cheaper by retail investors who may have held back from buying a $1,000 stock. While this sentiment is purely psychological, ushering in a new base of investors can help increase Netflix's trading liquidity. 

Why November and December could be monster months for Netflix

The upcoming split later this month will be the first time since 2015 that Netflix split its stock. As the trends below show, shares of Netflix experienced a bit of a run-up prior to its last split. This is not surprising, as smart investors likely anticipated that trading activity would rise following the split -- thereby propelling Netflix's valuation higher as retail investors poured into the stock.

NFLX data by YCharts

This is an important dynamic to understand. While stock splits themselves do not change the valuation of the company, rising inflows of investors can fuel the share price -- and therefore the market value -- of the company significantly higher after a split occurs.

To me, the bigger catalyst on the horizon for Netflix is the long-awaited return of one of its most celebrated pieces of content: Stranger Things. According to Netflix's data, Stranger Things is the third-most watched show of all time on the platform.

Unlike prior seasons, the final installment of Stranger Things is going to feature a staggered release -- with episodes airing Nov. 26, Dec. 25, and Dec. 31. I think this strategy is pretty savvy, as it should keep existing subscribers and viewers of the show tied to the platform while also generating a good deal of media buzz and word-of-mouth style marketing -- potentially leading to an influx of new subscribers eager to catch up on content. 

Is Netflix stock a buy right now?

Netflix currently trades at a forward price-to-earnings (P/E) ratio of 43 -- near its highest levels in three years. While the company undoubtedly sports a premium valuation, I think Netflix is well deserving of its prices.

NFLX PE Ratio (Forward) data by YCharts

The combination of predictable revenue, expanding profit margins, and compounding earnings is a rarity for any business -- let alone a media and entertainment company. Unlike some of its peers, Netflix doesn't seem to be affected by seasonality or the sensitivity of consumer discretionary spending habits.

In essence, Netflix has created a sticky ecosystem featuring millions of users glued to the company's content. Management understands these dynamics, hence they remain focused on building Netflix into a trillion-dollar enterprise by next decade.

While the company certainly has some near-term catalysts, the biggest takeaway is that Netflix stock has steadily climbed throughout its history -- prior to and following stock split events, as well as growing into any momentum surrounding new content releases.

For these reasons, I think now is as good a time as ever to scoop up shares of Netflix stock with the intention to hold on for the long run.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Netflix just announced a 10-for-1 stock split — Here's why the stock looks like a no-brainer buy right now appeared first on The Motley Fool Australia.

The United States is simply home to a vast majority of the most dominant companies in the world. The likes of Commonwealth Bank of Australia (ASX: CBA) and Telstra Group Ltd (ASX: TLS) are wonderful, successful companies. But they just can't match the ubiquity of names like, for example, Apple, Amazon, or Coca-Cola.

So today, let's talk about three US stocks that I think have more potential than most of the stocks listed on the ASX. An investment in any of these three, in my view, could make long-term investors very wealthy.

3 US stocks that could make shareholders rich

Costco Wholesale Corp (NASDAQ: COST)

Supermarket chain Costco is first up here. If you haven't shopped at a Costco yet, you've probably heard about its buy-in-bulk store format or perhaps its rather unusual membership model. Unusual it may be, but it is also a raging success.

Costco continues to grow and expand into new markets, quarter after quarter, and year after year. It even counted the late, great Charlie Munger as one of its loudest backers. I would happily buy more Costco today as a solid bet on a future consumer staples titan.

Visa Inc (NYSE: V)

Speaking of titans, next up is a US stock that arguably already commands that status. Visa is one of the most well-known brands in the world in 2025. Chances are, you have at least one of their cards in your wallet right now. Together with its rival, Mastercard, these two companies form a significant part of the glue that holds the global payments system together.

In facilitating funds transfers between banks, customers and retailers, Visa gets to clip the ticket every time something is bought on its network. This has allowed the company's growth to explode in recent years as more and more payments shift from cash to cashless. As this trend is only in its infancy in many parts of the world, Visa's growth runway doesn't look like it's running out of room anytime soon.

Netflix Inc (NASDAQ: NFLX)

Our final US stock worth checking out today is another brand we'd probably all be familiar with. Netflix only launched in Australia ten years ago. Since then, it has literally become a household name, with its logo present on almost every television remote these days. Despite the company running out of new markets to launch in, it continues to grow.

The push to limit password sharing a few years ago has proven a massive success. With the company expanding into gaming and other market segments, I don't see us giving up our Netflix subscriptions anytime soon. Recently, this US stock announced a 10-for-1 stock split, which demonstrates the ongoing appetite for its shares.

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This index fund has soared in popularity amongst ASX investors in recent years, thanks to its future-facing composition and tech-heavy exposure.

As my Fool colleague Bronwyn reported late last month, NDQ is one of the most sought-after ASX ETFs on our market. It is currently the seventh-most popular fund by funds under management. We also recently covered how NDQ was the fourth most-bought fund for customers using the Stake brokerage platform over the second half of the 2025 financial year.

The Betashares Nasdaq 100 ETF is a relatively simple index fund, covering the largest non-financial stocks listed on the US' Nasdaq stock exchange. The Nasdaq is known for housing most of America's best-known tech stocks. That includes all of the famous 'Magnificent 7', as well as companies like Airbnb, Netflix, Adobe and PayPal.

It's not just a tech ETF, though. Some other names that can be found in NDQ's holdings include Starbucks, Pepsico, Monster Beverage and Cadbury-owner Mondelez International.

But let's get down to the numbers.

How much would $10,000 invested in the NDQ ETF in 2020 be worth today?

Five years ago, on 5 November 2020, NDQ's ASX units were being priced at $27.59 each. Today, at the time of writing anyway, those same units are worth $57.85 each. That's a gain worth 110%. Or approximately 15.95% per annum.

Not bad. This means investors would have more than doubled their capital investment alone, with that $10,000 turning into $20,968 or so today. Most of these gains came from simple stock price appreciation. However, some would also have come from currency returns too.

Although NDQ is an ASX-listed ETF, its portfolio is priced in US dollars. That means that its returns need to be converted from US dollars to Australian dollars before we can assess them. The Australian dollar is almost 10% lower today against the greenback than it was five years ago. As a result, his would have provided our returns with an additional (and meaningful) boost.

However, that's not where the story ends. As Betashares NASDAQ 100 ETF investors would know, this fund also pays out periodic dividend distributions.

Since late 2020 and today, investors have enjoyed around $4.32 in dividend distributions per NDQ unit. That would see our investor bank another $1,636 in returns over the five-year period.

As such, we can conclude that a $10,000 investment in the ASX's NDQ ETF would be worth a total of roughly $22,603.50 right now. Again, not bad.

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With a share price over $1,100 and a decade since its last split, many investors have been wondering if Netflix (NASDAQ: NFLX) would split its stock in 2025 or 2026. And sure enough, the speculation ended on Oct. 30 when Netflix announced a 10-for-1 stock split, which was followed by a favorable reaction in Netflix's stock price on Oct. 31.

Netflix and nine other companies make up the "Ten Titans," which are 10 influential growth stocks that account for over 40% of the S&P 500. These industry-leading companies have crushed the broader market in recent years, and some have room to run even higher.

Here's why Netflix remains a top Titan to buy now, and the impact of the stock split on Netflix shareholders and potentially the Dow Jones Industrial Average. 

Why stock splits matter

After the close of trading on Friday, Nov. 14, Netflix shareholders as of record on Nov. 10 will receive nine additional shares for every share held, with split-adjusted trading commencing at market open on Nov. 17. In other words, the size of the pie isn't changing. Instead, it will be cut into 10 times more slices.

Stock splits don't impact a company's value or change the underlying investment thesis. However, they aren't meaningless.

In its press release, Netflix said, "The purpose of the stock split is to reset the market price of the Company's common stock to a range that will be more accessible to employees who participate in the company's stock option program." Having a lower share price also makes it easier for individual investors to trade options on Netflix, since options are usually in 100-share increments. With a share price over $1,000, it would take over $100,000 in a cash-supported account to sell an option on Netflix.

A stock split can also increase a company's chances of getting added to the Dow. Amazon, Nvidia, and Sherwin-Williams were added to the Dow in 2024. And all three companies split their stocks in the last few years. With the median stock price in the Dow around $250 per share and a max price under $800, there's next to no chance that Netflix would be considered without splitting its stock because a price over $1,000 would significantly alter the dynamics of the price-weighted index. Granted, it's unlikely Netflix would be added anyway, since that would probably involve replacing Walt Disney. But the stock split does boost Netflix's chances.

Some consider all Dow companies to be blue chip stocks, even if they don't pay dividends. So being added to the Dow would cement Netflix's industry leadership and make it a core member of all four major indexes -- the S&P 500, Nasdaq Composite, Russell 2000, and the Dow.

Stock splits matter less today than in years past due to the widespread availability of fractional shares and low-cost trading. Fractional shares allow investors to commit a dollar amount in a stock rather than invest in per-share increments. And many brokerages offer zero-cost trading. In the past, stock splits made a big difference by lowering the entry point for individual investors -- effectively leveling the playing field and taking away an advantage previously held by institutions with multimillion-dollar portfolios.

Netflix is a high-conviction buy

Netflix's stock split is a vote of confidence that management believes the company has a long runway for earnings growth. The 10-for-1 ratio is a bit surprising as well. Last month, I predicted Netflix would issue a 7-for-1 split. But a 10-for-1 split puts the share price close to $100, which isn't necessarily a big deal, except that a big drop would push the stock price into double digits, which some investors view as a psychological barrier. Some institutions avoid investing in stocks below a certain price -- especially once they get in the single digits. So the 10-for-1 split is a signal from Netflix to Wall Street that it expects the stock price to go up over time.

Netflix hasn't been shy about valuation-based targets. Management set an internal goal to reach a $1 trillion market cap by 2030 and grow operating income faster than revenue -- thereby expanding operating margins. Netflix's market cap currently sits below half a trillion, mainly because the stock nosedived after its latest earnings report. Netflix took a $619 million charge due to a Brazilian tax dispute. But the operating results were exceptional -- reinforcing why Netflix is a terrific long-term buy.

Netflix continues to steadily increase earnings, expand its margins, and demonstrate pricing power even in an environment where consumer spending is strained. Chipotle Mexican Grill just fell a staggering 18% in 24 hours after announcing its quarterly earnings -- yet another example of consumers tightening discretionary spending on restaurants, goods, and services. By comparison, Netflix's latest quarterly results show that its membership remains a priority for many individuals and households.

A potential dividend-paying Dow stock

On its own, Netflix's stock split isn't a reason to buy or sell the stock, but it does affect how Netflix's employees and investors interact with the stock and improves its chances of one day being added to the Dow.

Instead of buying Netflix for its stock split, a better approach is to focus on the company's impeccable fundamentals. Netflix is a high-margin cash cow that's growing at an impressive rate despite a slowdown in discretionary spending, especially among lower- and middle-income households.

Netflix's global subscriber base allows it to produce expensive, high-quality content while still turning a huge profit. As Netflix matures, I could see the company begin to pay a steadily growing dividend. And if Netflix does eventually surpass $1 trillion in market cap, it may find its way into the Dow. Especially given that post-split, Netflix could double in price and still be right around the median price of a Dow stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Netflix (NASDAQ: NFLX) continues to prove that it's a top performer. In the last 12 months (as of Oct. 17), the streaming disruptor's shares have jumped 74%. At the same time, the S&P 500 has produced a total return of 16%. Netflix has even drastically outperformed Bitcoin, the world's leading cryptocurrency.

Where will this dominant streaming stock be in one year?

Netflix has tremendous momentum on its side

Despite a feeling of general economic uncertainty over the past couple of years, Netflix continues to prove that it's an outstanding business that has tremendous momentum on its side. The company received a boost during the pandemic, then experienced a temporary slowdown. It's back to registering strong growth and operating at a very high level.

Management stopped reporting subscriber numbers last year. At the end of 2024, the company had nearly 302 million members. Since revenue increased by 14% through the first six months of 2025 on a year-over-year basis, the membership count has likely continued to expand. And there is potential for further growth over the long term.

Globally, Netflix is "less than 50% penetrated into connected households," Chief Financial Officer Spencer Neumann said in January on the 2024 fourth-quarter earnings call. Wall Street analysts believe that it will post 16% revenue growth in 2025, followed by a 13% gain in 2026.

Now that the company has reached a huge scale, its profitability has been impressive. Operating margin in the second quarter was a robust 34%. This is an improvement of 7 percentage points from the operating margin in the second quarter of 2024. Because the company has big fixed costs on content creation and licensing, its bottom line can rise faster than its revenue base once it reaches a certain size.

Netflix also collects billions of dollars of free cash flow (FCF) annually, which the leadership team uses to repurchase shares. It's easy to be optimistic that FCF will increase meaningfully in the years ahead.

Investors should have total confidence that Netflix will have more subscribers and generate higher revenue and profits a year from now. While fundamental success depends on a favorable economy, the company should do well barring a severe recession that forces households to drastically cut their spending.

One key variable matters most to stock prices in the short term

Long-term investing success comes from finding high-quality businesses and owning them for many years. With that being said, there aren't many investors who would argue with the fact that Netflix is a phenomenal company. It's a category creator, having led the streaming industry to take attention away from traditional cable TV by leveraging the internet to serve video content. The brand is strong, and the business has massive scale.

The streaming stock's historical performance speaks for itself. In the past 20 years, shares have skyrocketed 29,090%. Investors who got in early have generated incredible wealth.

As mentioned, the company continues to perform at a high level from a fundamental perspective. This means that Netflix should be on every investor's watchlist as a potential portfolio addition.

To be clear, though, the stock doesn't look to be a very good buying opportunity right now. The market is asking investors to pay a price-to-earnings ratio of 51. Starting from a high valuation like this doesn't bode well for the stock price over the next 12 months since market sentiment has the biggest impact over such a short period.

If Netflix were trading at a much cheaper valuation, which might indicate softer market expectations, then there would be upside in the near term. However, this isn't the case. And it makes me believe that the stock could lag the overall market between now and the middle of October 2026.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Netflix (NASDAQ: NFLX) has been, without a doubt, one of the best investments of the past couple of decades. Since October 2005, shares have soared 29,100% (as of Oct. 17). Had investors bought just $3,500 worth of the streaming stock at that time, they'd have $1 million today. That's a wonderful outcome.

Today, Netflix dominates the industry. It ended last year with 302 million subscribers. And the business carries a huge market cap of $510 billion. If you bought this stock today, though, could it help you become a millionaire?

Netflix still has a bright future

At its current scale, it's a reasonable assumption that Netflix won't put up the same monster growth that it did in the past. For an extended period of time, the company faced minimal direct competition in the streaming market. It provided a much better experience than traditional cable TV, which helped it expand rapidly. Consequently, members and revenue skyrocketed, as Netflix propelled the cord-cutting trend. Investors who got in early on this disruptor were clearly rewarded.

These days, the competition is fierce, as other streamers try to capture viewer attention. Netflix is no longer the only game in town. Major media and entertainment companies have created rival streaming services that are finding different levels of success. This just means that Netflix must continue operating at a high level to stay ahead of the pack.

However, this doesn't necessarily mean the future isn't bright. In fact, Netflix should still have lots of success going forward. It's still growing at a solid clip. Through the first six months of 2025, sales were up 14% year over year. While the U.S. and Canada reach maturity, Netflix can lean on international markets to drive more growth, particularly in the Asia-Pacific region and Latin America. The company's ability to create localized content that has global appeal certainly plays to its advantage.

It's also encouraging to see the leadership team continue to evolve the corporate strategy. What was unthinkable even half a decade ago is now the new normal. For example, Netflix has cracked down on password sharing, extracting more value from its viewers in the process.

What's more, the business now offers an ad-supported subscription tier. It's all about giving consumers choice. This option can bring in price-sensitive members, which can expand Netflix's total addressable market. So far, this has been a huge success, with ad revenue expected to double in 2025.

Netflix has also gotten into live events, something that co-founder and former CEO Reed Hastings said before it wouldn't do. People can watch NFL games on Christmas Day, as well as boxing and wrestling matches.

The leadership team remains optimistic about the opportunity ahead. Co-CEO Greg Peters said that there are "hundreds of millions" of more people to still sign up. This positive outlook means Netflix will be generating more revenue and more free cash flow far into the future.

What is the stock's true potential?

Netflix is clearly a great business. And its dominance of the streaming landscape isn't going to change anytime soon. This means the company should be on every investor's watch list.

The first question to consider is whether or not this stock is a smart buy today. Netflix shares trade at a price-to-earnings ratio of 51. This is an expensive valuation, to be sure. The bulls will argue that Netflix is deserving of a high P/E multiple simply because of how successful it has been from a fundamental perspective.

But I view the stock as being priced to perfection, with zero margin of safety for prospective investors. Therefore, I don't think Netflix is a smart buying opportunity right now. And given the stage of its life cycle that it's in, I have confidence that it isn't a millionaire-maker going forward.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There were a flurry of stock splits last year, including Nvidia, Broadcom, Chipotle, and Walmart, among others. But 2025 hasn't been nearly as active a year for stock splits. 

Here's why Netflix (NASDAQ: NFLX) and Meta Platforms (NASDAQ: META) stand out as top candidates to split their stocks in 2026.

When stock splits make sense

Stock splits provide an opportunity to make a company's shares more accessible to smaller investors with limited capital. While they are less important in today's age of zero-cost trading and fractional shares, companies will still pursue stock splits for other benefits like employee compensation and psychological appeal too.

For example, Berkshire Hathaway offers class A shares and class B shares. At the time of this writing, A shares trade for around $750,000 compared to $500 for B shares, with each B share making up 1/1,500^th of an A share. If given the choice to invest $500 in B shares or buy 1/1,500^th of a fractional share of class A, many investors will prefer the simplicity (and satisfaction) of owning one full B share.

It's also worth noting that options contracts are typically packaged in increments of 100 shares. A lower stock price can increase interest from smaller investors who are looking to buy or sell options.

Despite these benefits, a company should only execute a stock split if it is confident it can grow its value and, in turn, its share price over time. Oracle split its stock a staggering six times between 1995 and 2000. It was too much, too fast. The dot-com bubble burst, and it took over 15 years for Oracle to exceed its all-time high from 2000. Oracle has not split its stock since then.

Netflix and Meta could split next year

Netflix and Meta have what it takes to continue compounding in value, setting the stage for stock splits in 2026.

It's been over a decade since Netflix last split its stock. The company is a completely different business today, shifting its focus from growing revenue and subscribers to cash flow and profitability. Netflix is achieving impeccable results despite much more difficult competition from legacy media companies that are expanding their streaming offerings, as well as tech companies like Apple and Amazon that offer their own services as well.

By 2030, Netflix plans to triple operating income from 2024 levels, grow operating income faster than revenue (thus expanding margins), and hit a $1 trillion in market cap. With a share price over $1,200 at the time of this writing, I could see Netflix splitting its stock by 7-for-1 in 2026, which is the same ratio as its split in 2015.

Since its initial public offering in 2012, Meta has never split its stock. It is the only member of the "Magnificent Seven" or "Ten Titans" to have never done so -- and for good reason. It's easy to forget that Meta fell below $100 per share in the fall of 2022 as investors heavily criticized management's decision to invest in the metaverse. The company recovered because it unlocked massive engagement increases through short-form videos, which made Instagram more attractive for advertisers.

Artificial intelligence (AI) was another big change for Meta, as the company has fine-tuned its algorithm to further boost engagement and provide useful metrics for advertisers. In short, Instagram has become one of the most sought-after platforms for targeted digital advertising. And Meta's share price is now over $700, a remarkable recovery in less than three years.

Like Netflix, Meta is now consistently profitable and raking in free cash flow (FCF). In the last three years, Meta has increased its FCF by 163%, and Netflix has boosted its FCF more than fivefold. What's particularly impressive about Meta's FCF growth is that it is spending a record amount on capital expenditures to boost AI infrastructure. Without that AI spending, FCF would be much higher. But investors would probably prefer the company to invest in long-term growth, given the potential reward. I could see Meta announcing a 5-for-1 split next year.

Two potential Dow Jones components

Netflix and Meta's industry leadership, profitability, and international growth potential give both companies the green light to split their stocks in 2026. Another reason these companies may split their stocks is to get added to the Dow Jones Industrial Average.

For a stock to be added to the Dow (which is a price-weighted index), its stock price can't be too high, or it would excessively shift the balance of the index. It's worth mentioning that Nvidia, Amazon, and Sherwin-Williams all underwent stock splits before being added to the Dow in 2024. Adjusted for splits, all three stocks had a share price below $400 when they were added to the Dow.

A glaring flaw in the Dow is that it doesn't have exposure to social media. With two large cloud providers already in the Dow (Amazon and Microsoft), Meta might have a better chance of replacing Verizon Communications than Alphabet.

A less likely scenario is that Netflix replaces Walt Disney in the Dow. Disney has been underperforming the broad market for years, but it has made substantial headway in monetizing its streaming business recently.

Beyond the typical benefits, stock splits would also position Meta and Netflix for consideration in the event of further Dow Jones index shakeups in 2026. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Stock splits don't change the fundamentals of a stock, but they still have a way of getting investors excited and capturing media attention.

First and foremost, stock splits tend to represent milestones in a stock's growth. They signal that management is confident enough in the business to lower the individual share price, effectively resetting shares for another run higher. There's also some evidence that stocks tend to outperform following a split.

According to research from Bank of America going back four decades, stocks that underwent a split rose 25.4%, more than doubling the return of the S&P 500 at just 11.9%, as the infographic below shows.

Image source: Statista.

That pattern seems to be evidence of correlation rather than causation. After all, companies are free to decide when they split their stocks, and they're more likely to do so when they're confident that the price will continue to rise. And splits are more common in bull markets, especially during surges like the dot-com boom. They're rarely seen during bear markets.

Given the propensity for outperformance following a stock split and the fact that the share price is lowered, benefiting retail investors, it's not surprising that the moves tend to attract so much attention.

One top stock that could be next in line for a split is Netflix (NASDAQ: NFLX), the streaming giant that has bucked the broader malaise in the entertainment industry to deliver monster returns over the last three years.

NFLX data by YCharts.

Netflix's shares are now hovering around $1,200, giving it one of the highest share prices in the S&P 500. The company is set to report fourth-quarter earnings on Oct. 21, and that could serve as an opportunity to announce a split since companies often choose to time them with earnings reports.

The case for a Netflix stock split

Netflix's 400% gain over the last three years hasn't come by accident. The company has delivered strong growth on the top and bottom lines as initiatives like advertising, paid sharing, and live events have resonated with its audience.

Advertising in particular has opened up a new revenue stream, giving it a way to grow without adding new subscribers or raising prices. It's also given Netflix cover to raise prices on premium tiers because it now has lower-priced ad-driven tiers for subscribers on a budget.

While some high-priced stocks have historically avoided stock splits, that isn't the case with Netflix. The company issued a 7-for-1 stock split in 2015, and a 2-for-1 split before that in 2004. Both times, the individual share price was much lower than it is today.

There's also another less obvious reason that a stock split would benefit Netflix. A lower share price would make the stock eligible to join the Dow Jones Industrial Average. At a market cap of $500 billion, Netflix is now much larger than many of the stocks in the Dow, and its industry -- entertainment -- is arguably underrepresented on the blue-chip index. While Disney is a member, no other Dow stocks derive a majority of their business from media or entertainment.

Is Netflix a buy?

Netflix isn't a member of the "Magnificent Seven," but it's outperformed many of those high-profile tech stocks in recent years. Nearly all of those have had stock splits in recent years, so it seems like Netflix is due.

When it reports third-quarter earnings on October 21, analysts expect revenue to grow 17% year-over-year to $11.5 billion. Earnings per share should increase from $5.40 to $6.94.

The stock isn't cheap at a price-to-earnings ratio of 50, but it dominates global video entertainment, and it still has a long runway of growth thanks to advertising and its local content strategy, which should drive further gains.

A stock split could help kick off the next leg up for Netflix stock. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The calendar quarter just ended. And with the start of October here, companies are getting ready to provide investors with a fresh set of financials, giving the market valuable insights into their operations. Netflix (NASDAQ: NFLX) is usually early to report its numbers, with its earnings call scheduled later in the month of October.

Netflix continues to have a lot of momentum on its side. And it has been a wildly successful investment in the past. Should you buy this top streaming stock before its Q3 earnings update is revealed on Oct. 21?

Beating Wall Street estimates

Netflix shares have crushed the market in the past. Over the last decade, shares have soared nearly 1,000% (as of Oct. 2). The gains have continued recently, as the stock is up 30% in 2025 (at the time of this writing).

It's usual that for shares to perform so well, the underlying business reports financial results that come up well ahead of expectations. This is precisely what Netflix has done. When the company reported Q1 and Q2 results, it beat Wall Street estimates on both the top and bottom lines.

And for the three-month period that ended Sept. 30, the sell-side analyst community expects Netflix to report revenue of $11.5 billion and diluted earnings per share (EPS) of $6.95. These projections are roughly in line with what Netflix's leadership team is forecasting. Executives think sales and diluted EPS will grow 17.3% and 27.2%, respectively, in the third quarter.

If the company outperforms, there is a very strong likelihood that the stock will pop. Even better, a favorable outlook for Q4 to wrap up the year would certainly drive even more bullish fever. Should this happen, it would be a smart move to buy shares today.

Always focus on the long term

Regardless of the view you have on Netflix's third quarter financials, no one has any idea how the market will react. In the short term, sentiment is the biggest factor moving share prices. And there's no way to accurately predict what the market's mood will be at any given point in time.

While it can certainly be exciting to make an investment decision based on an upcoming event, with the goal of generating a quick profit, investors should really be thinking about this situation with a long-term time horizon. In other words, only look to buy Netflix shares with a perspective that's fixed on the next five or 10 years. This will force you to consider the factors that are most important, which are the fundamentals of the business.

Based on Netflix's ongoing success, investors can confidently say that the company will likely have more subscribers, as well as higher revenue and earnings, in the future. That's a very encouraging perspective to have. And it's not a wild assumption, especially with proven pricing power, the impressive adoption of the ad-supported tier, strong free cash flow generation, and a fruitful entry into live events.

However, the market has lofty expectations, as shown by the valuation. Shares currently trade at a price-to-earnings (P/E) ratio of 49.5, which is certainly expensive any way you look at it. Of course, a clear argument can be made that Netflix is deserving of such a high P/E multiple. It has a large and engaged global audience, massive scale to invest in fresh content, a powerful brand name, and robust financial performance. It's hard to be pessimistic, even though a reasonable perspective is that returns going forward might disappoint.

In my view, the stock is too rich to put new capital to work. However, if investors have a desire to own the best companies in the world, then I can understand why buying shares today is the move. Just make sure you're making a decision that's based on looking well beyond the Oct. 21 financial update. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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As a reminder, the NDQ ETF allows investors to invest in 100 of the largest businesses listed on the NASDAQ. It's quite a tech-heavy fund because many of the world's biggest tech businesses are listed on the NASDAQ.

Share prices of the US giants have delivered strong gains in the last couple of years as investors anticipated rate cuts, which did eventually come. But, there could be further rate cuts on the cards following comments by US Federal Chair Jerome Powell.

According to reporting by CNBC, the employment numbers have rapidly cooled, leading to Powell to comment that the risk between high inflation and high unemployment is "shifting". This means the Federal Reserve may change its focus to support employment rather than taming inflation, leading to rate cuts.

Chairman Powell said:

The shifting balance of risks may warrant adjusting our policy stance.

Rate cuts could be good news for shareholders because it could increase the valuations of businesses even more.

Why do rate cuts matter?

As one of the world's greatest investors, Warren Buffett, once said:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

Therefore, when rate cuts occur, it makes assets more valuable, at least in theory. That sounds like good news for the NDQ ETF, in my view.

Is this a good time to buy the NDQ ETF?

The exchange-traded fund (ETF) not as cheap as it was a few months ago, a year ago or five years ago. It would have been better to buy earlier than today. However, I certainly don't think this will be the highest the Betashares Nasdaq 100 ETF unit price ever gets to.

There are many great businesses in the portfolio such as Microsoft, Alphabet, Amazon, Nvidia, Apple, Meta Platforms and Netflix. There are some less high-profile, high-quality names such as Costco and Intuitive Surgical too.

These businesses are typically the ones leading the way in their respective industries such as e-commerce, cloud computing, social networks, smartphones, AI, e-commerce and so on. I think they are likely to collectively to continue growing earnings at a solid pace for the foreseeable future.

So, despite the relatively high valuations, I think their share prices will be higher in five years and ten years, which is why I'd still describe this as a good time to invest in the NDQ ETF, even if there's volatility in the short-term.

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Key Points

• Netflix’s double-digit revenue growth is set to continue in the years ahead, according to consensus estimates.

• Thanks to its massive scale, the business is producing robust free cash flow.

• The current valuation reveals the market’s enthusiasm toward Netflix.

Netflix (NASDAQ: NFLX) continues to operate momentum on its side. Through the first seven months of 2025, shares of this global entertainment giant have climbed 30%, continuing an impressive streak of market-thumping returns.

The top streaming stock is taking a breather, as it's down 13% from its peak (as of July 31). Some investors might be taking profits off the table after the company's incredible run. Are Netflix shares a buy, sell, or hold in 2025?

Netflix's double-digit growth continues

Even though macro uncertainty rules the economic narrative these days, Netflix remains in solid shape. Through the first six months of 2025, the company's revenue totaled $21.6 billion, representing a 14.2% jump from the same period last year. The leadership team raised guidance, as it now sees sales coming in between $44.8 billion and $45.2 billion for the full year.

As of Dec. 31, 2024, Netflix had 302 million subscribers. Management stopped reporting quarterly subscriber numbers this year. However, new customers are still part of the story. "Year-over-year revenue growth was primarily a function of more members, higher subscription pricing, and increased ad revenue," the Q2 2025 shareholder letter reads.

Looking ahead, investors have reasons to be optimistic. "We still got hundreds of millions of folks to sign up. And from a revenue perspective, we're about 6% of consumer spend and ad revenue in the countries we serve in the areas that we serve," co-CEO Greg Peters said during the Q1 2025 earnings call.

Growth will undoubtedly slow, but this commentary is encouraging. And according to Wall Street consensus analyst estimates, revenue will increase at a compound annual rate of 13.1% between 2024 and 2027. It wouldn't be surprising to see Netflix keep posting double-digit revenue gains.

Generating robust profits

It has been remarkable watching Netflix's journey to dominating the streaming landscape. The business has certainly proved the skeptics wrong. These naysayers believed that Netflix would never be able to report consistent and growing profits, mainly because of how much money it was required to spend on content every year.

Netflix kept growing, adding subscribers and revenue, and now has reached a massive scale that has bolstered its income statement. The company's operating margin went from 7.3% in 2014 to 26.7% in 2024. This highlights the benefit of having large, fixed costs at a time when sales have expanded rapidly. Netflix can maintain its powerful competitive position because it has so many subscribers who bring in revenue and allow the company to keep spending on content and marketing efforts.

In 2025, the leadership team expects Netflix to produce $8 billion to $8.5 billion in free cash flow. That would represent a 19.6% year-over-year increase (at the midpoint). This underscores just how lucrative the business model has become.

Here's what investors should do

Netflix has crushed the market in 2025. And in the past 12 months, the stock is up 86%. To be fair, the company is reporting phenomenal financial results that highlight just how much demand there is for the streaming platform. What's more, the profits aren't too shabby.

But I believe Netflix shares have gotten ahead of themselves. As of July 31, they trade at a price-to-earnings (P/E) ratio of 49.4. This multiple alone has soared 147% just in the past three years, as the market's optimism about the company has become strikingly clear.

In my view, the stock is overvalued today. Between now and 2030, I wouldn't be shocked to see the P/E ratio contract. I don't think investors should buy shares. In fact, the best thing might be to take some profits off the table. But if you remain bullish, consider holding. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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