Netflix (NFLX) may be synonymous with on-demand streaming, but investors looking to profit from the booming video market might find a better value in YouTube’s parent company, Alphabet (GOOG), whose shares trade at a much lower valuation.
That’s according to professional stock and options trader Adam Khoo, who recently compared the revenue and price-to-earnings multiples of both companies.
Alphabet’s scale is striking, Khoo noted, with YouTube alone bringing in more revenue than Netflix. In 2024, YouTube generated $42.5 billion in sales, outpacing Netflix’s $39.2 billion.
Yet Netflix trades at a P/E ratio of 63 - more than three times Alphabet’s P/E of 19.
“One is a steal right now,” Khoo wrote, referring to Alphabet.
Other metrics tilt in Alphabet’s favor as well. YouTube not only out-earns Netflix, but its capital expenditures are far lower thanks to its revenue-sharing model with creators. It also boasts stronger operating margins.
So far this year, Netflix shares have surged 49%, closing Friday at $1,323.12 and giving the company a market capitalization of $563 billion.
Alphabet, meanwhile, has lagged the broader market, down 6.5% year-to-date to $178.27 per share, with a market cap of about $2.2 trillion.
Breaking down usage metrics
Netflix made headlines in the fourth quarter of 2024 when it surpassed 300 million paid subscribers worldwide, adding nearly 20 million new members in just one quarter.
Ironically, despite hitting this milestone, Netflix announced it will stop reporting quarterly subscriber counts and instead shift focus to key financial metrics such as revenue, operating income, net profit, and free cash flow.
YouTube doesn’t attract the same spotlight as Netflix because it’s just one part of Alphabet’s sprawling business - and not even the largest, with “Google Search & Other” generating more than half of total revenue.
Still, industry data shows that YouTube boasts over 2.5 billion monthly active users, making it the second most visited website in the world, behind only Google Search itself.
Equally impressive, YouTube’s Premium and Music subscriptions have grown to 125 million paid users.
“This momentum is critical to our goal of becoming the No. 1 contributor of revenue to the industry, and we won’t stop until we get there,” wrote Lyor Cohen, YouTube’s global head of music.
Cohen pointed out that it’s YouTube — not Netflix — that holds the top spot for total watch time among U.S. streaming platforms based on Nielsen data.
YouTube expects the revival of music videos and the rise of AI-generated content to further boost viewership.
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