Is Netflix's Ad-Driven Surge Sustainable for Impressive Growth, or Will it Lead to a Pricey Stock?

Netflix has had a strong year, with its stock rising nearly 40% year-to-date, outperforming Disney, which gained about 12% over the same period. Netflix's success can be attributed to its strategies such as cracking down on password sharing and expanding its ad-supported streaming offering.

The ad-supported tier has been particularly successful, attracting more price-sensitive customers, with users increasing from 23 million to 40 million in just a few months.

In addition, Netflix is promoting its ad-supported service by offering perks such as ad-free episodes for binge-watchers and improving the video quality to full high-definition. Also, the company is investing in advertising technology and plans to introduce its in-house ad tech platform. Furthermore, its push into live sports streaming, including airing NFL games on Christmas Day, suggests a focus on growing its advertising business.

Despite its recent strong performance and better-than-expected earnings, there are concerns about Netflix being overvalued. The stock trades at about 40 times forward earnings, which some analysts believe is expensive. Moreover, slowing consumer spending growth and a slight uptick in the unemployment rate could impact Netflix's subscriber growth in future.

Having said that some analysts have set a price estimate for Netflix at $528, which is below the current market price. These factors are worth considering when evaluating the outlook for Netflix.