Key Takeaways
- Goldman Sachs elevated Netflix from Neutral to Buy, increasing the price target from $100 to $120
- Shares declined 18% in the last half-year, partially attributed to concerns surrounding the terminated Warner Bros. Discovery merger
- The streaming giant secured approximately $2.8 billion as a termination fee following the abandoned acquisition
- Analysts forecast advertising income expanding from roughly $1.5B in 2025 to approximately $9.5B by 2030
- The company implemented price increases of $1–$2 monthly across primary U.S. subscription options
On Sunday, Goldman Sachs elevated its rating on Netflix to Buy from Neutral, simultaneously increasing the 12-month price objective to $120 from the previous $100 mark. The investment bank emphasized an improved “risk/reward from current levels” as the streaming platform approaches its Q1 financial results.
Shares have declined 18% during the preceding six-month period. Goldman Sachs attributed a portion of this weakness to confusion surrounding Netflix’s unsuccessful bid to purchase Warner Bros. Discovery’s streaming platforms and studio operations.
Netflix terminated the transaction and secured roughly $2.8 billion as a merger termination payment from PSKY. Goldman Sachs believes the company is transitioning back to what analysts describe as “a standalone execution story.”
The upgraded rating rests on three fundamental pillars. First is top-line expansion. Goldman Sachs anticipates low double-digit revenue increases throughout the coming three to four years, fueled by new subscriber growth, enhanced average revenue per user, and expanding advertising operations.
Advertising Revenue Projections
Goldman Sachs forecasts 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 the decade’s end. Company leadership has indicated expectations to double advertising revenue during the current year.
Netflix implemented subscription fee adjustments across its three primary U.S. membership levels in March 2026, ranging from $1 to $2 monthly increases depending on the selected tier. Goldman Sachs calculates these adjustments could generate a combined $3 billion in additional revenue spanning 2026 and 2027.
Despite these adjustments, Netflix’s standard subscription rates remain attractive relative to competing services. The ad-supported membership tier continues to be priced lower than comparable offerings from primary rivals.
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 throughout the next three years, underpinned by moderating content expenditure growth and disciplined cost management.
Goldman Sachs also indicated that Netflix’s internal projection for approximately $11 billion in free cash generation during 2026 might prove overly cautious, particularly following the termination of the Warner Bros. transaction.
Shareholder Capital Allocation Resumes
The third component involves capital distribution. Netflix has repurchased $21 billion worth of shares since 2023, representing approximately 90% of yearly free cash flow on average, prior to suspending buybacks during merger discussions.
Goldman Sachs presented a framework where Netflix could repurchase 20–25% of its present market capitalization throughout the next five-year period, delivering significant support to per-share earnings growth.
From a valuation perspective, Netflix currently trades at a price-to-earnings-to-growth multiple of approximately 1.1x, substantially below its five-year historical median of roughly 1.65x. Goldman Sachs considers current levels an attractive entry opportunity.
Netflix concluded 2024 with approximately 90 million subscribers throughout the U.S. and Canada combined. According to eMarketer statistics, the typical U.S. subscriber dedicates over one hour daily to the platform, substantially exceeding the 36 minutes spent on Hulu, the nearest competitor.
Netflix discontinued reporting precise subscriber figures last year. The upcoming Q1 earnings announcement will represent the next significant milestone for market participants.
