High-quality companies create a lot of value over the long term. Sometimes, that means their stock price soars into the hundreds or even thousands of dollars, which can make it difficult for retail investors to buy in.

Companies can rectify that with a stock split, which increases the number of shares in circulation and proportionately reduces the price per share. For example, a 10-for-1 split would increase the company's share count 10-fold, and reduce its price per share to one-tenth of what it was previously.

A split is purely a cosmetic maneuver -- it doesn't change the value of the underlying company at all. It's simply designed to make the stock more accessible to smaller investors.

That brings me to Netflix (NFLX -0.74%). The streaming giant's share price is closing in on $1,000 following the recent release of an incredibly positive financial results for 2024. So, is a stock split on the way for Netflix in 2025?

Netflix added more subscribers than expected in the final quarter of 2024

Netflix added 18.9 million new subscribers during the fourth quarter of 2024 (ended Dec. 31, 2024), which was significantly more than the 8.2 million Wall Street had forecasted. It takes the company's total subscriber base to a record high of 301.6 million, further solidifying its position as the world's top streaming platform for movies and TV shows. Disney's Disney+ is in a distant second place with just 122 million subscribers.

Several things have contributed to Netflix's recent strength, including an incredibly strong content slate (more on that in a moment). However, nothing has been as beneficial as the introduction of its advertising subscription tier in 2022. Customers can now get the full Netflix experience for just $7.99 per month, as long as they're willing to watch ads. It's much cheaper than the standard plan ($17.99 per month) and the premium plan ($24.99 per month).

During Q4 2024, the ad tier accounted for 55% of all new signups in countries where it's available. Plus, the number of ad tier members grew by 30% compared to just three months earlier in the third quarter. Here's the kicker: Each of those subscribers will become more valuable to Netflix over time as its advertising platform achieves scale. In other words, businesses will pay a higher price to market their products on Netflix as the ad tier grows its membership base.

On that note, Netflix said its advertising revenue doubled in 2024 compared to the prior year, and management expects it to double again in 2025.

Overall, Netflix generated a record $39 billion in total revenue during 2024, which was a 15.7% increase compared to the prior year. That marked an acceleration from the 6.6% growth it delivered in 2023, which speaks to the company's incredible momentum right now.

Netflix's earnings per share (EPS) soared by 64.8% to an all-time high of $19.83. It highlights the benefits of the company's incredible scale, especially since many of its competitors are struggling to make money.

Image source: Netflix.

Live programming is a game changer for Netflix

To grow advertising revenue, Netflix needs to find new ways to keep users engaged. The longer they spend on the platform, the more ads they will see, and the more ad dollars Netflix will attract. Subscribers currently spend an average of two hours watching Netflix each day, but live programming has the potential to boost that figure.

On Christmas Day, Netflix exclusively showed both NFL games, which attracted audiences of 30 million people and 31 million people, making them the most streamed NFL games in history. The average football game runs for three hours and 12 minutes, so a single game will drive above-average engagement for any subscriber who watches it from start to finish.

That followed the Mike Tyson-Jake Paul boxing match in November, which became the most streamed live sporting event ever at the time.

Netflix's 10-year contract with TKO Sports to become the exclusive home of World Wrestling Entertainment (WWE) kicked off this month. WWE Raw will stream live every week worldwide, with Smackdown and NXT also streaming weekly outside the U.S. The deal covers several live events each year, including blockbuster specials like WrestleMania and SummerSlam.

Netflix plans to spend a record $18 billion on content during 2025 to extend its advantage over the competition, but there is a long way to go, and live events are only one piece of the puzzle. Management estimates that the company has only penetrated 6% of its $650 billion global addressable market in the entertainment industry, which includes subscriptions, advertising, gaming, and more.

Netflix stock could soar further, so a split might be inevitable

I want to set aside the cosmetic state of Netflix stock for a moment to talk about its valuation. It trades at a price-to-earnings (P/E) ratio of 49.6, which is actually below its five-year average of 51.6.

Wall Street's consensus forecast (provided by Yahoo) suggests that the company's EPS could grow to $24.69 in 2025, placing the stock at a forward P/E ratio of 39.9. The Street thinks Netflix's EPS could top $30 in 2026, which places the stock at a forward P/E of 32.8.

NFLX PE Ratio data by YCharts.

In other words, assuming Wall Street's estimates are accurate, Netflix stock would have to soar by 51% over the next two years just to maintain its current P/E ratio of 49.6.

Since Netflix stock is approaching $1,000 right now, it might be unaffordable for many retail investors who want to own one full share and capture that potential upside. Hence, I think a split is likely sometime in 2025. If it happens, it will be the company's third.

The stock was trading at $800 at the time of the most recent split in 2015, which is further evidence that another one might be around the corner. I think a 10-for-1 split would work well this time, which would take Netflix stock from a recent price of $984 to $98.40.

Popular companies like Nvidia and Broadcom also executed 10-for-1 stock splits over the past year, so Netflix would be in good company.