Netflix, Inc. (NFLX) enters its Q1 earnings with a rating upgrade from Goldman Sachs to Buy from Neutral, accompanied by a price target increase to $120 from $100.

According to Investing.com, the analysts cite improved risk-reward from current levels. The stock has fallen 18% over six months, linked to the failed Warner Bros. Discovery acquisition attempt. Netflix gained a $2.8 billion termination fee, enabling a return to core operations.

The bull case hinges on three factors. Low double-digit revenue growth is expected for years ahead, from subscribers, higher pricing, and advertising. Ad revenue could triple to $4.5 billion by 2027 from $1.5 billion in 2025, boosted by recent U.S. price hikes adding $3 billion over 2026-2027.

Goldman forecasts 250bps yearly GAAP operating margin expansion over three years, supported by moderated content spending and cost discipline. The $11 billion 2026 free cash flow target seems conservative post-M&A.

With 222 million paid members worldwide, Netflix repurchased $21 billion in shares since 2023, averaging 90% of free cash flow before pausing for the deal.

The firm sees potential for 20-25% of the $393 billion market cap repurchased over five years, aiding EPS growth.

Valuation-wise, the PEG ratio at 1.1x is below the five-year average of 1.65x. Consensus from four analysts is Outperform, with a $91.50 target versus $92.97 current price.