TLDR
- Citi resumed coverage of Netflix with a Buy rating and a $1,115 target price
- Three catalysts cited: margin upside, a US price hike in Q4 2026, and larger buybacks
- Citi forecasts 2026 operating margins ~40 bps above consensus
- Advertising revenue risk flagged — Citi projects ~$9B by 2030 vs. consensus of ~$11B
- Netflix stock popped 14% in late February after walking away from the Warner Bros. Discovery deal
Netflix is back in the buy column at Citi. The bank reinstated coverage this week with a Buy rating and a $1,115 price target, pointing to a combination of margin expansion, pricing moves, and capital returns as the key drivers.
Analyst Jason Bazinet laid out three reasons the firm is bullish. First, Citi sees Netflix’s 2026 EBIT guidance moving higher, with operating margins forecast to come in around 40 basis points above what Wall Street currently expects. The argument is straightforward: costs are tracking more favorably than the consensus assumes.
Second, Citi expects Netflix to raise prices in the US in Q4 2026. That’s not a new playbook for the company — price hikes have historically translated into revenue beats — and Wall Street is already watching for when the next one lands.
Third, with the Warner Bros. Discovery deal off the table, there’s no major acquisition draining capital. Citi says that frees the company up to lean harder on buybacks. Netflix’s cash generation profile, the bank argues, supports elevated shareholder returns in the years ahead.
The Warner Bros. Discovery episode is worth a pause. Netflix walked away from talks in late February after deciding the financial terms weren’t attractive enough. The stock jumped 14% on the news. Taking on a heavy debt load to integrate a sprawling media business would have complicated the clean financial story Netflix has built.
Profitability in Focus
That financial story is genuinely strong. Netflix posted a 29.5% operating margin in 2025, up from 18% back in 2020. Revenue is expected to hit $51.2 billion in 2026 at the midpoint — roughly 13% growth year-over-year.
Ad sales are a growing part of that picture. The company projects ad revenue will double to around $3 billion in 2026. The advertising tier has been one of the more closely watched growth levers since Netflix launched it a few years back.
Citi updated its model after Q4 2025 results, lifting revenue expectations and margin estimates. Even with the more cautious advertising assumption, the numbers were enough to justify the Buy call.
Where the Risk Lives
Advertising, though, is where Citi pumps the brakes slightly. The bank projects Netflix will generate around $9 billion in ad revenue by 2030 — about $2 billion below the current Street consensus of $11 billion. Citi also models annual ad growth of roughly $1.5 billion from 2027 onward, versus the ~$2 billion pace the consensus assumes.
That’s not a deal-breaker for the bullish thesis, but it’s a number to watch. If ad revenue growth disappoints, estimates will need to come down.
Valuation is the other pressure point. Netflix trades at a P/E of around 38.4. That’s a multiple that prices in continued execution. Any stumble in growth or margins tends to get punished at that kind of level.
On the competitive front, Netflix’s share of US TV viewing time rose from 7.5% in Q4 2022 to 8.8% in January 2026. YouTube still holds a 42% higher share than Netflix, a gap the streaming leader has yet to close.
Citi’s $1,115 target implies upside of roughly 5% to 17% from current levels, depending on where the stock is trading.
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