TLDR
- Goldman Sachs upgraded Netflix from Neutral to Buy, raising its price target to $120 from $100
- NFLX has dropped 18% over the past six months, partly due to overhang from its failed Warner Bros. Discovery acquisition bid
- Netflix collected a ~$2.8 billion termination fee after walking away from the deal
- Goldman projects ad revenues growing from ~$1.5B in 2025 to ~$9.5B by 2030
- Netflix recently raised U.S. subscription prices by $1–$2/month across its main tiers
Goldman Sachs upgraded Netflix to Buy from Neutral on Sunday, lifting its 12-month price target to $120 from $100. The bank cited a “more positive risk/reward from current levels” heading into Netflix’s Q1 earnings report.
The stock has fallen 18% over the past six months. Goldman linked part of that decline to uncertainty around Netflix’s now-abandoned attempt to acquire Warner Bros. Discovery’s streaming and studio assets.
Netflix walked away from that deal and collected a roughly $2.8 billion merger termination fee from PSKY in the process. Goldman sees the company returning to what it calls “a standalone execution story.”
The upgrade is built on three main arguments. The first is revenue growth. Goldman expects low double-digit revenue growth over the next three to four years, driven by subscriber additions, higher revenue per member, and a growing ad business.
Advertising Revenue in Focus
Goldman projects Netflix’s ad revenues will rise from around $1.5 billion in 2025 to approximately $4.5 billion by 2027, and nearly $9.5 billion by 2030. Management has said it expects to double ad revenue this year.
Netflix also raised prices across its three main U.S. subscription tiers in March 2026, by $1 to $2 per month depending on tier. Goldman estimates those increases could add a cumulative $3 billion in incremental revenue across 2026 and 2027 combined.
Even with the increases, Netflix’s standard pricing remains competitive with rivals. Its ad-supported tier is still priced below those of its main competitors.
The second pillar of Goldman’s case is margin expansion. The bank forecasts around 250 basis points of annual GAAP operating margin expansion over the next three years, supported by slowing content spending growth and cost discipline.
Goldman also suggested that Netflix’s own guidance for roughly $11 billion in free cash flow in 2026 may be conservative, now that the Warner Bros. deal is off the table.
Capital Returns Back on the Table
The third element is capital returns. Netflix repurchased $21 billion of its own stock since 2023, averaging around 90% of annual free cash flow, before pausing buybacks during the acquisition process.
Goldman outlined a scenario where Netflix could repurchase 20–25% of its current market cap over the next five years, which would provide a tailwind to earnings per share.
On valuation, Netflix currently trades at a price-to-earnings-to-growth ratio of around 1.1x, below its five-year historical average of roughly 1.65x. Goldman views this as an entry point.
Netflix ended 2024 with nearly 90 million subscribers across the U.S. and Canada. The average U.S. subscriber spends over one hour per day on the platform, according to eMarketer data, compared to 36 minutes for the next closest competitor, Hulu.
Netflix stopped reporting exact subscriber numbers last year. Its Q1 earnings report will be the next major data point for investors.
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