Quick Summary
- Goldman Sachs elevated Netflix from Neutral to Buy, increasing the price target from $100 to $120
- Shares have declined 18% in the last six months, influenced by complications from the unsuccessful Warner Bros. Discovery acquisition attempt
- The streaming giant secured approximately $2.8 billion in termination fees following the collapsed merger
- Goldman forecasts advertising revenue expansion from roughly $1.5B in 2025 to around $9.5B by 2030
- The company implemented $1–$2 monthly price hikes across primary U.S. subscription plans
On Sunday, Goldman Sachs elevated Netflix to a Buy rating from Neutral, while increasing its 12-month price objective to $120 from $100. The investment bank highlighted “more positive risk/reward from current levels” as the streaming company approaches its Q1 earnings announcement.
Shares have retreated 18% during the previous six-month period. Goldman attributed a portion of this downturn to concerns surrounding Netflix’s canceled bid to purchase Warner Bros. Discovery’s streaming portfolio and production facilities.
Netflix abandoned the transaction and secured roughly $2.8 billion in break-up fees from PSKY as compensation. Goldman anticipates the company will refocus on what analysts describe as “a standalone execution story.”
The upgrade rests on three fundamental pillars. First is revenue acceleration. Goldman anticipates low double-digit revenue expansion throughout the upcoming three to four years, fueled by membership growth, increased average revenue per user, and accelerating advertising operations.
Ad Revenue Projections Take Center Stage
Goldman anticipates Netflix’s advertising income will climb from approximately $1.5 billion in 2025 to roughly $4.5 billion by 2027, reaching nearly $9.5 billion by 2030. Company leadership has indicated expectations to double advertising revenue during the current year.
Netflix implemented subscription cost increases across its three primary U.S. tiers in March 2026, ranging from $1 to $2 monthly per plan. Goldman calculates these adjustments could generate a combined $3 billion in additional revenue spanning 2026 and 2027.
Despite these hikes, Netflix’s standard subscription rates remain competitive within the marketplace. The platform’s ad-supported option continues to be priced lower than comparable offerings from primary competitors.
The second component of Goldman’s investment thesis centers on profitability enhancement. Analysts project approximately 250 basis points of yearly GAAP operating margin growth throughout the next three-year period, underpinned by moderating content investment growth and operational efficiency.
Goldman also indicated that Netflix’s internal projection of roughly $11 billion in free cash flow for 2026 might prove understated, particularly following the termination of the Warner Bros. transaction.
Share Buyback Program Resumes
The third foundation involves shareholder returns. Netflix has executed $21 billion in stock repurchases since 2023, representing approximately 90% of yearly free cash flow, before temporarily suspending the program during acquisition discussions.
Goldman presented a framework where Netflix could repurchase 20–25% of its existing market capitalization throughout the next five years, creating meaningful support for per-share earnings growth.
Regarding valuation metrics, Netflix currently commands a price-to-earnings-to-growth ratio near 1.1x, substantially below its five-year historical median of approximately 1.65x. Goldman interprets this as an attractive entry opportunity.
Netflix concluded 2024 with approaching 90 million subscribers throughout the U.S. and Canada. Data from eMarketer indicates the average U.S. member consumes more than one hour daily on the service, compared to 36 minutes for the closest rival, Hulu.
Netflix discontinued publishing precise subscriber figures last year. The forthcoming Q1 earnings release will serve as the next critical benchmark for market participants.
