Key Highlights
- Goldman Sachs elevated Netflix from Neutral to Buy, increasing the price target from $100 to $120
- Shares of NFLX have declined 18% in the last half-year, influenced by concerns surrounding its unsuccessful Warner Bros. Discovery takeover attempt
- The streaming giant secured approximately $2.8 billion as a termination fee upon abandoning the acquisition
- Goldman anticipates advertising revenue will surge from roughly $1.5B in 2025 to about $9.5B by 2030
- The company implemented a $1–$2 monthly price increase across its primary U.S. subscription plans
On Sunday, Goldman Sachs elevated its rating on Netflix to Buy from Neutral, while simultaneously increasing its 12-month price objective to $120 from $100. The investment bank pointed to an “improved risk/reward profile at these levels” as the company approaches its first-quarter earnings announcement.
Shares have retreated 18% during the preceding six-month period. Goldman attributed a portion of this weakness to the cloud of uncertainty surrounding Netflix’s ultimately unsuccessful bid to purchase Warner Bros. Discovery’s streaming platforms and production operations.
Netflix terminated that transaction and received approximately $2.8 billion in breakup fees from PSKY as compensation. Goldman believes the company is now refocusing on what the firm describes as “an independent operational narrative.”
The rating upgrade rests on three core themes. First among these is top-line expansion. Goldman anticipates low double-digit percentage revenue increases throughout the coming three to four years, fueled by new subscriber growth, increased average revenue per user, and expansion of its advertising platform.
Ad Revenue Trajectory
Goldman’s forecasts suggest Netflix’s advertising income will climb from approximately $1.5 billion in 2025 to roughly $4.5 billion by 2027, before reaching nearly $9.5 billion by 2030. Company leadership has indicated expectations to double advertising revenue during the current year.
Netflix implemented price adjustments across its three core U.S. subscription options in March 2026, adding $1 to $2 monthly depending on the plan selected. Goldman calculates these adjustments could generate a combined $3 billion in additional revenue throughout 2026 and 2027.
Despite these adjustments, Netflix’s standard subscription fees remain competitive within the marketplace. The company’s advertising-supported option continues to be priced lower than comparable offerings from major competitors.
The second foundation of Goldman’s investment thesis centers on profitability improvement. The firm projects approximately 250 basis points of yearly GAAP operating margin enhancement over the coming three years, underpinned by moderating content expenditure growth and operational efficiency.
Goldman also indicated that Netflix’s internal forecast of roughly $11 billion in free cash flow for 2026 may prove overly cautious, particularly given the Warner Bros. transaction is no longer proceeding.
Shareholder Distributions Resume
The third component involves capital allocation to shareholders. Netflix has bought back $21 billion worth of its shares since 2023, representing approximately 90% of yearly free cash flow generation, though buybacks were suspended during the acquisition evaluation period.
Goldman presented a potential scenario where Netflix could repurchase 20–25% of its present market capitalization throughout the next five years, creating upward pressure on per-share earnings metrics.
From a valuation perspective, Netflix currently trades at a price-to-earnings-to-growth multiple of approximately 1.1x, meaningfully below its five-year historical median of roughly 1.65x. Goldman interprets this gap as an attractive opportunity.
Netflix concluded 2024 with close to 90 million paid subscribers throughout the United States and Canada. According to eMarketer research, the average American subscriber dedicates more than one hour daily to the service, versus 36 minutes for its nearest competitor, Hulu.
Netflix discontinued publishing granular subscriber metrics last year. The forthcoming Q1 earnings release will serve as the next significant checkpoint for market participants.
