Investing.com -- Goldman Sachs upgraded Netflix to Buy from Neutral, raising its 12-month price target to $120 from $100, as the Wall Street firm argued the streaming giant’s shares offer a "more positive risk/reward from current levels" heading into its first-quarter earnings report.

The upgrade comes after Netflix shares fell 18% over the past six months, a decline Goldman attributed in part to overhang from the company’s now-abandoned bid to acquire Warner Bros. Discovery’s streaming and studio assets.

With Netflix having walked away from that deal — collecting a roughly $2.8 billion merger termination fee from PSKY in the process — Goldman analysts see the company returning to "a standalone execution story" with scope for a positive estimates revision cycle.

The bank’s bull case rests on three pillars. First, analysts see sustained low double-digit revenue growth over the next three to four years, driven by a combination of paid subscriber additions, higher subscription revenue per member, and a rapidly scaling advertising business.

Goldman projects advertising revenues growing from roughly $1.5 billion in 2025 to around $4.5 billion by 2027 and nearly $9.5 billion by 2030. In March 2026, Netflix raised prices across its three main U.S. subscription tiers, a move the analysts estimate could add a cumulative $3 billion in incremental revenues in 2026 and 2027 combined.

Second, Goldman expects steady margin expansion, forecasting around "250bps of annual GAAP operating income margin expansion over the next 3 years", supported by moderating content spending growth and broader cost discipline.

It also sees management’s prior guidance for roughly $11 billion in free cash flow in 2026 as potentially conservative, "particularly now that the company has walked away from its prior M&A initiatives."

Finally, the analysts also highlighted the potential for significant capital returns. Netflix repurchased a cumulative $21 billion in shares since 2023, averaging roughly 90% of annual free cash flow, before pausing buybacks during the Warner Bros acquisition process.

Goldman outlined a scenario in which Netflix repurchases "~20-25% of its current market cap over the next 5 years," providing a meaningful tailwind to earnings per share.

On valuation, Goldman noted that Netflix currently trades at a price-to-earnings-to-growth ratio of around 1.1 times, well below its five-year historical average of roughly 1.65 times and below pre-acquisition announcement levels, which the firm sees as an entry point.