Goldman Sachs has raised its rating for Netflix from "Neutral" to "Buy," citing an improved risk-reward profile ahead of the company's earnings release on April 16. The firm also increased its price target to $120, implying approximately 26% upside from current levels.
The upgrade comes after Netflix shares declined 16% over the past six months. Goldman Sachs attributes part of this decline to lingering pressure from the company's previously proposed bid for Warner Bros. Discovery assets. With Netflix having abandoned the deal and receiving approximately $2.8 billion in termination fees from Paramount's Skydance, analyst Sheridan believes Netflix will refocus on its independent execution narrative, creating room for positive earnings estimate revisions.
Goldman's bullish thesis rests on three pillars. First is revenue contribution from the U.S. market price increase effective March 2026, which the firm estimates will cumulatively add $3 billion in revenue during 2026 and 2027. Second is an annual GAAP operating margin expansion of approximately 250 basis points over the next three years. Third is capital returns, with management's $11 billion free cash flow target for 2026 potentially viewed as conservative now that mergers and acquisitions are off the table.
Advertising monetization represents a longer-term growth driver. Goldman Sachs projects Netflix's advertising revenue will increase from around $1.5 billion in 2025 to approximately $4.5 billion by 2027, approaching $9.5 billion by 2030.
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