Netflix received a positive rating update from Goldman Sachs on Monday. The investment bank highlighted that following the resolution of the dispute with Paramount's Skydance over Warner Bros., Netflix's revenue outlook has improved, its return on capital has increased, and its growth trajectory has become clearer. Goldman Sachs raised its rating on Netflix from "Neutral" to "Buy" and increased its price target by 20% to $120, suggesting an approximate 26% upside potential. Analyst Eric Sheridan stated that, bolstered by its advertising business and planned subscription price increases, the streaming company could achieve double-digit revenue growth over the next three to four years. Sheridan also believes that, supported by disciplined content spending, GAAP operating margins could expand by approximately 250 basis points annually over the next three years. He added that Netflix could return 20% to 25% of its market capitalization to shareholders via capital returns over the next five years. Netflix is scheduled to report its first-quarter results after the market closes on April 16. Wall Street expects non-GAAP earnings per share of $0.77 and revenue of $121.7 billion. This upgrade from Goldman Sachs comes as the stock continues to attract support from investors focused on earnings growth and cash returns.
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