The world is Netflix's (NASDAQ: NFLX) oyster. Here's the math behind the market cap target of $1 trillion by 2030

Video streaming processed through the cloud has turned the media sector into a truly worldwide game. Netflix has taken advantage of this global pie, investing to produce video specifically in markets such as Europe, Latin America, South Korea, and India.

World is oyster for Netflix as it aims for $1 trillion market cap by 2030

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Video streaming processed through the cloud has turned the media sector into a truly worldwide game. This is how Netflix (NASDAQ:) has been able to grow so large, investing to produce video specifically in markets such as Europe, Latin America, South Korea, and India.

That global expansion is how it eclipsed 300 million total subscribers at the end of 2024, making it the largest pure-play premium video streamer in the world. With a global population of 8 billion and rising use of the internet every year, there is plenty of room to expand its total subscribers in the years to come.

Another factor for success is pricing power. In the U.S., its premium subscription tier has gone from $11.99 a month in 2013 to $24.99 currently. This more than doubling in monthly subscription fees has helped revenue grow by close to 600% in the last 10 years.

More importantly, it has helped the company gain some operating leverage over its cost base, with operating income inflecting higher to $11.3 billion in the last few years. Free cash flow is now positive at $7.5 billion over the last 12 months, giving the company the flexibility to keep pushing for more growth globally.

NFLX Operating Margin (TTM) data by YCharts; TTM = trailing 12 months.

Investors should be aware that these figures are still preliminary and may be revised in the coming months.

According to reporting from The Wall Street Journal, management aims to double its revenue to $80 billion in 2030 and triple its operating income to around $30 billion. Advertising revenue of $9 billion will be a large part of that equation.

How will the company do it? It hopes to grow its total subscribers to 410 million compared to 300 million at the end of 2024. However, that would only lead to about a 30% increase in revenue assuming no changes to subscription pricing.

What this means is that Netflix will need to continue increasing the price of its subscription service while simultaneously growing advertising sales if it hopes to double revenue in the next seven years. This is a tall task, but one it is poised to achieve.

Tripling operating income to $30 billion feels doable as well. Expanding operating margins is not something a company can do indefinitely, but N has consistently pushed up its operating margin in the last 10 years, hitting 28% in the last 12 months. I think the company can keep expanding its profit margins as it scales up to greater heights in the years to come.

That $30 billion in operating income likely equates to $25 billion in net income when factoring in corporate tax rates. Should N be valued at a trillion-dollar market cap if it generates $25 billion in net income? Maybe. That is a P/E ratio of 40, which is well above the average for stocks, even durable growers like N.

It is possible, but not a guarantee, that the market cap will double to $1 trillion in the next seven years. We have no idea what the stock's future P/E will be.

It still remains a good hold for investors who have bought the stock in the past. However, I don't think N is a strong buy today.