Netflix (NASDAQ: NFLX) has established itself as one of the most remarkable success stories in the stock market of the 21st century, particularly standing out as a major player over the past three years. The streaming service, which revolutionized the way we consume media, faced significant challenges in 2022 when it appeared to be struggling following two consecutive quarters of declining subscriber growth. This downturn was largely attributed to the aftermath of the COVID-19 pandemic, which had altered the viewing habits of millions around the globe.

However, Netflix has managed to bounce back by implementing several strategic changes. Among the most notable was its crackdown on password sharing, a common practice that had diluted its revenue potential. In addition, the company introduced a new advertising tier, diversifying its revenue streams in a market it had previously sidestepped, and began to invest in live sports, an area that had long been seen as outside its core business.

As a result of these proactive measures, Netflix has returned to impressive growth for both its revenue and profit margins. Over the past three years, its stock has surged dramatically, propelling its market capitalization past the $400 billion mark. According to a recent report from The Wall Street Journal, Netflix management is now optimistic about its potential to reach a staggering trillion-dollar valuation by the year 2030. Achieving this ambitious goal would require the stock price to increase by 139% over the next five years, assuming the number of shares remains stable.

But can Netflix realistically achieve such lofty aspirations? Let's explore the various factors that could influence its trajectory.

One of the key drivers behind Netflixs success is its ability to distinguish itself from competitors, particularly as traditional media giants such as Disney have struggled to gain a foothold in the streaming arena. In the previous year alone, Netflix added more than 40 million subscribers, boosting its total subscriber count to over 300 million. Moving forward, the company has set an audacious target of reaching 410 million subscribers by the conclusion of 2030. This would entail a compound annual growth rate of approximately 5% over six years, translating to an average addition of 18 million subscribers annually. Given Netflixs historical performance of adding between 25 million to 30 million subscribers each year, this goal appears well within reach.

However, its important to note that Netflixs growth has begun to plateau in key markets, particularly in North America. With around 90 million subscribers, Netflix commands nearly 75% of all broadband households in the region, making further significant growth more challenging as the service matures.

In a strategic pivot, Netflix has also attracted a host of new advertisers by lowering its advertising rates. Recent statistics revealed that 43% of new subscribers opted for the ad-supported tier in February, underscoring the potential for increased revenue in this segment. Unlike traditional subscriptions, ad-based revenue has a higher ceiling because Netflix can earn more as users consume more of its programming. This shift in approach also clarifies why the company has decided to stop reporting subscriber numbers on a quarterly basis, although updates will likely come when significant milestones are achieved.

Looking ahead to 2030, Netflix has ambitious revenue targets, including plans to increase its ad revenue from an estimated $2 billion this year to a remarkable $9 billion. This strategy is part of a larger plan to double its annual revenue to $80 billion, while also aiming to enhance its operating income significantly, from $10.4 billion last year to an impressive $30 billion.