Goldman Sachs upgraded Netflix to Buy, raising its 12-month price target to $120 from $100 and saying the stock offers a "more positive risk/reward from current levels" as it approaches the company’s first-quarter earnings report.
Netflix’s shares have declined about 18% over the past six months, a pullback Goldman attributes in part to the uncertainty surrounding the streaming company’s now-abandoned bid to acquire Warner Bros. Discovery’s streaming and studio assets. After walking away from the deal, Netflix received a merger termination fee of roughly $2.8 billion from PSKY, a development Goldman views as clearing the way for the company to return to "a standalone execution story."
Goldman’s upside scenario rests on three pillars.
- Revenue growth: The bank expects sustained low double-digit revenue growth over the next three to four years. Goldman identifies three contributors: paid subscriber additions, higher subscription revenue per member and a rapidly scaling advertising business. The analysts project advertising revenues expanding from about $1.5 billion in 2025 to roughly $4.5 billion by 2027 and near $9.5 billion by 2030. They also note that price increases implemented in March 2026 across Netflix’s three main U.S. subscription tiers could add an estimated cumulative $3 billion in incremental revenues across 2026 and 2027.
- Margin expansion: Goldman forecasts approximately 250 basis points of annual GAAP operating income margin expansion over the next three years. The bank expects this improvement to be supported by moderating growth in content spending and broader cost discipline. It also characterizes management’s prior guidance for around $11 billion in free cash flow in 2026 as potentially conservative, particularly now that the company has stepped away from prior M&A initiatives.
- Capital returns: The firm highlights Netflix’s history of returning capital, noting the company repurchased a cumulative $21 billion in shares since 2023, an amount that equated to roughly 90% of annual free cash flow before buybacks were paused during the Warner Bros. Discovery acquisition process. Goldman laid out a scenario in which Netflix repurchases approximately 20-25% of its current market capitalization over the next five years, a program the analysts see as a meaningful tailwind to earnings per share.
Valuation considerations
On valuation, Goldman points out that Netflix is trading at a price-to-earnings-to-growth ratio of around 1.1 times. That multiple sits well below the company’s five-year historical average of roughly 1.65 times and below levels that prevailed before the acquisition announcement - a discrepancy Goldman views as a potential entry point.
Heading into the upcoming earnings report, Goldman’s upgrade signals the firm’s view that the combination of revenue upside, margin recovery and a renewed focus on share repurchases together create a more favorable risk/reward profile than the market has been pricing in.
Sector context
The analysis has implications for streaming and broader media market participants, advertisers and investors focused on technology and consumer subscription businesses, where revenue mixes, content costs and capital-return policies materially affect cash flow and valuation.