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Earnings season is rolling around again, and if you're watching the tape, you might notice something interesting happening with Netflix (NFLX). The sentiment is shifting, but it's not your average retail investor driving the change. This time, it's the big money—institutional investors and Wall Street analysts—who are leaning bullish again. And when that happens, it's usually a good idea to pay attention.
So what exactly are they seeing that has them feeling optimistic? Let's walk through it.
One of the clearest signs of this shift is the upgrade from Goldman Sachs (GS) analyst Eric Sheridan, who moved Netflix to a "Buy" rating. He bumped the price target up to $120, suggesting there's upside potential from here. Why the confidence? Sheridan points to a simple but powerful change: the risk/reward profile has become more attractive.
Netflix isn't being viewed as a high-risk gamble anymore. Instead, it's starting to look like a company that has figured out its model—steady execution, improving monetization, and a clear plan. That's exactly the kind of story institutional money loves as earnings approach. When a major investment bank upgrades a stock just weeks before results, it often means they have a good feeling about what's coming.
And Goldman isn't alone in this view. But before we get to the other firms, let's dig into why expectations are turning bullish.
Take a step back, and you'll see Netflix isn't just a streaming service anymore. Sure, content is still the backbone—Netflix Originals and new launches will always make headlines. But the real story is happening elsewhere.
The company is expanding into new areas:
Each of these offers fresh engagement loops and, more importantly, new revenue streams. Then there's advertising, which might be the biggest unsung hero in this whole narrative.
Netflix's ad tier is gaining momentum, and early signs show strong interest. The more subscribers opt for lower-priced plans, the more chances Netflix has to earn from them twice—once as a subscriber and again through ads. Over time, this could balance out the revenue difference between ad-supported and premium users.
Here's something ironic: one of the most bullish developments for Netflix recently came from a deal that never happened. On the surface, pulling back from a major acquisition like Warner Bros. Discovery (WBD) might seem like a mistake. But the market had other ideas.
When Netflix abandoned the pursuit and left it to Paramount Skydance, the market reacted positively. Netflix realized the deal wasn't in its best financial interest, despite initially seeing it as a smart strategic move. Instead of overspending, the company walked away and collected a $2.8 billion breakup fee.
That decision did two things: it proved Netflix's capital efficiency, and it removed a big overhang from the stock. Unsurprisingly, the stock jumped in the days after the news.
As mentioned, Goldman isn't the only firm turning bullish. Jefferies (JEF) reiterated its "Buy" recommendation and set an even higher price target of $134, suggesting more upside if Netflix delivers positive earnings guidance. Their experts highlight:
On the investment side, firms like Western Financial Corp CA have been actively expanding their positions. According to recent regulatory filings, the company holds over 25,000 shares valued at more than $2.3 million—a 300% increase. That's a significant move.
When you see multiple institutions moving in the same direction, it's usually a sign that something is up.
Now, let's talk about what really matters: the numbers. Netflix reported solid growth for 2025:
Even more impressive, annual free cash flow in 2025 hit $9.46 billion, up almost 37% from the previous year. This is part of why analysts expect the company to beat forecasts again with the upcoming earnings.
But perhaps the biggest growth driver is the ad business. Only three years into its ad tier, the division recorded $1.5 billion in revenue in 2025, and the company expects that to double to around $3 billion next year. What makes this possible? Netflix has its own advertising tech stack, meaning it controls pricing, targeting, and profits—something other companies often have to outsource.
One of the biggest fears around Netflix has always been churn: raise prices too much, and users leave. But the data tells a different story. About 44% of subscribers who cancel eventually return within a year. Others simply downgrade to cheaper plans instead of leaving entirely. Either way, they stay within the ecosystem, which is a key advantage.
Instead of having to "win" or "lose" subscribers outright, Netflix just needs to keep users in its ecosystem, whether through premium or ad-supported plans. Research from MoffettNathanson also found that Netflix offers the lowest cost per hour of entertainment among all streaming competitors. In other words, consumers still see it as one of the best values out there.
Given all this, it's easy to see why Wall Street has a positive outlook. About 73% of analysts rate the stock as either a Buy or Strong Buy, reflecting confidence in future growth. From a valuation perspective, Netflix is trading at around 38 times earnings, which might sound pricey, but it's below its three-year average of about 45 times earnings. Forward valuations look more favorable, with the company trading at around 30 times earnings based on projected revenue growth.
Trying to time earnings is essentially guessing how the market will react. The real question is: Are you in it for the long game? If so, the timing of your purchase might not matter as much. The stock looks fairly valued, even slightly undervalued compared to its historical levels. For a company that keeps growing its revenue base and building new monetization models, this valuation seems reasonable.
In my view, the bull case gets stronger every day, and the money agrees. The only question left is whether you want to wait for confirmation or get in before the crowd catches on.
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