Netflix (NFLX) Stock Jumps 3% Following Goldman Sachs Buy Rating

Key Takeaways

• Goldman Sachs elevated Netflix from Neutral to Buy, increasing its 12-month price objective to $120 from $100
• The streaming giant’s shares have declined 18% in the last six months, influenced by its unsuccessful Warner Bros. Discovery takeover attempt
• The company secured approximately $2.8 billion as a termination payment after abandoning the acquisition
• Goldman anticipates advertising revenue climbing from roughly $1.5B in 2025 to approximately $9.5B by 2030
• The streaming service implemented price hikes of $1–$2 monthly across its primary U.S. subscription packages

On Sunday, Goldman Sachs moved Netflix to a Buy rating from Neutral, simultaneously raising its 12-month price objective to $120 from $100. The investment bank pointed to an improved “risk/reward from current levels” as the streaming company approaches its Q1 earnings announcement.

Netflix, Inc., NFLX

Shares have dropped 18% during the previous six-month period. Goldman attributed a portion of this downturn to concerns surrounding Netflix’s terminated bid to purchase Warner Bros. Discovery’s streaming operations and production facilities.

Netflix terminated that transaction and received approximately $2.8 billion as a merger breakup fee from PSKY. Goldman believes the entertainment company is now reverting to what analysts describe as “a standalone execution story.”

The rating enhancement rests on three primary factors. First is top-line expansion. Goldman anticipates low double-digit revenue expansion throughout the coming three to four years, fueled by new subscriber acquisition, increased average revenue per user, and expanding advertising operations.

Advertising Business Takes Center Stage

Goldman forecasts Netflix’s advertising income will expand from approximately $1.5 billion in 2025 to roughly $4.5 billion by 2027, reaching nearly $9.5 billion by 2030. Company leadership has indicated expectations to double advertising revenue within the current year.

Netflix implemented subscription fee increases across its three primary U.S. membership levels in March 2026, ranging from $1 to $2 monthly depending on the plan. Goldman calculates these adjustments could generate a combined $3 billion in additional revenue throughout 2026 and 2027.

Despite these adjustments, Netflix’s standard subscription costs remain competitive within the marketplace. Its advertising-supported option 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 over the upcoming three years, bolstered by moderating content expenditure growth and operational efficiency.

Goldman also indicated that Netflix’s internal projection for approximately $11 billion in free cash flow during 2026 might prove understated, particularly following the termination of the Warner Bros. transaction.

Shareholder Returns Resume

The third component involves capital allocation to shareholders. Netflix executed $21 billion in share repurchases since 2023, averaging approximately 90% of yearly free cash flow, before suspending buybacks while pursuing the acquisition.

Goldman presented a potential scenario where Netflix might repurchase 20–25% of its present market capitalization throughout the following five years, creating positive momentum for per-share earnings.

Regarding valuation metrics, Netflix presently trades at a price-to-earnings-to-growth multiple of approximately 1.1x, beneath its five-year historical mean of roughly 1.65x. Goldman perceives this as an attractive opportunity.

Netflix concluded 2024 with approximately 90 million paid memberships throughout the U.S. and Canada. The typical U.S. member dedicates over one hour daily to the service, based on eMarketer research, versus 36 minutes for its nearest rival, Hulu.

Netflix discontinued publishing precise subscriber figures last year. Its forthcoming Q1 financial results will represent the next significant milestone for market participants.

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