Key Moments
- Goldman Sachs upgraded Netflix to Buy from Neutral and lifted its 12-month price target to $120 from $100.
- The bank expects Netflix’s advertising revenue to rise from about $1.5 billion in 2025 to nearly $9.5 billion by 2030.
- Goldman projects Netflix could repurchase approximately 20-25% of its current market cap over the next 5 years.
Rating Upgrade and Price Target Increase
Goldman Sachs raised its rating on Netflix (NASDAQ:NFLX) to Buy from Neutral, arguing that the stock now offers a “more positive risk/reward from current levels” ahead of the company’s upcoming first-quarter earnings release. Alongside the upgrade, the bank increased its 12-month price target on the shares to $120, up from $100.
The firm pointed to the recent weakness in Netflix’s stock as a key factor behind the improved setup. The shares declined 18% over the last six months, a slide Goldman linked in part to investor uncertainty surrounding Netflix’s now-terminated effort to purchase Warner Bros. Discovery’s streaming and studio operations.
Impact of the Abandoned Warner Bros. Discovery Deal
Goldman noted that Netflix has stepped away from the proposed Warner Bros. Discovery transaction and, in doing so, received an estimated $2.8 billion merger termination fee from PSKY. With that process concluded, the analysts believe the narrative is shifting back to Netflix as “a standalone execution story,” which they see as opening room for upward revisions to earnings estimates.
Growth Drivers and Revenue Outlook
The bank’s bullish stance is built on three main components. First, Goldman expects Netflix to deliver steady low double-digit revenue expansion over the coming three to four years. This trajectory is anticipated to be supported by continued paid subscriber growth, higher average subscription revenue per member, and a rapidly expanding advertising business.
In its forecasts, Goldman projects that Netflix’s advertising revenue will rise from roughly $1.5 billion in 2025 to around $4.5 billion by 2027 and approach $9.5 billion by 2030.
The analysts also pointed to a recent price increase. In March 2026, Netflix implemented higher prices across its three primary U.S. subscription tiers. Goldman estimates that the combination of these increases could deliver a cumulative $3 billion in additional revenue across 2026 and 2027.
| Metric | Value / Period |
|---|---|
| Rating change | Neutral to Buy |
| 12-month price target | Raised from $100 to $120 |
| Share price performance (last 6 months) | -18% |
| Merger termination fee from PSKY | Approximately $2.8 billion |
| Projected ad revenue (2025) | Roughly $1.5 billion |
| Projected ad revenue (2027) | Around $4.5 billion |
| Projected ad revenue (2030) | Nearly $9.5 billion |
| Incremental revenue from 2026 U.S. price hikes (2026-2027 combined) | About $3 billion |
Margins, Cash Flow, and Cost Discipline
The second pillar of Goldman’s thesis centers on profitability. The analysts anticipate consistent margin gains, calling for “250bps of annual GAAP operating income margin expansion over the next 3 years.” This improvement is expected to be driven by slower growth in content spending and tighter overall cost control.
Goldman also addressed Netflix’s previously communicated outlook for free cash flow. Management had guided to around $11 billion of free cash flow in 2026, and the bank suggested that this figure could prove conservative, “particularly now that the company has walked away from its prior M&A initiatives.”
Share Repurchases and Capital Returns
The third component of the bullish view is the potential for continued capital returns. Goldman highlighted that Netflix repurchased a cumulative $21 billion in stock since 2023, which the firm said equated to approximately 90% of annual free cash flow, before buybacks were halted during the Warner Bros. acquisition attempt.
Looking ahead, Goldman sketched out a scenario where Netflix repurchases “~20-25% of its current market cap over the next 5 years,” which the analysts believe would provide a substantial boost to earnings per share.
| Capital Return Metric | Detail |
|---|---|
| Cumulative buybacks since 2023 | $21 billion |
| Buybacks as % of annual FCF (historical) | Roughly 90% |
| Projected buybacks (next 5 years) | ~20-25% of current market cap |
Valuation Perspective
On the valuation front, Goldman emphasized that Netflix is currently trading at a price-to-earnings-to-growth (PEG) ratio of about 1.1 times. This compares to a five-year historical average of roughly 1.65 times and is also below the level seen before the Warner Bros. acquisition effort was made public. The bank views this discount as an attractive opportunity for investors to establish or add to positions at what it considers favorable terms.
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