Netflix shares surge as Citi initiates coverage with $115 price target
Analyst cites potential EBIT guidance increase, upcoming price hikes and expanded buyback program as key catalysts
Netflix shares extended their recent rally on Wednesday after Citigroup initiated coverage of the streaming giant with a buy rating and a $115 price target, signaling more than 20 percent upside from current levels.
The stock, which has surged 22.8 percent over the past month, was trading at $94.42 at market close on Wednesday. Citi's $115 target represents 21.9 percent potential gains, coming on top of what has already been a robust recovery for the company that saw its 52-week high of $134.12 in early 2026 before dipping to a low of $75.01.
The bullish call centers on three primary catalysts that Citi analysts believe will drive Netflix's performance through the remainder of 2026: the potential for management to increase its full-year 2026 EBIT guidance, expected price hikes for U.S. subscribers in the fourth quarter, and an expanded share repurchase program.
"We see meaningful upside despite the recent rally," Citi analysts wrote in their initiation note, according to CNBC. The firm joins a growing chorus of Wall Street optimism toward Netflix, with 35 analysts rating the stock a buy or strong buy compared to just 10 holds and a single sell, according to market data.
Netflix's recent momentum follows a strong fourth-quarter earnings report that saw the company report revenue of $12.05 billion, beating analyst estimates of $11.97 billion and marking an 18 percent increase year-over-year. Earnings per share of $0.56 also topped expectations, while operating income jumped 30 percent to $2.96 billion, expanding the operating margin to 24.5 percent.
The streaming leader ended 2025 with 325 million paid memberships globally, adding approximately 23 million subscribers during the year. While this represented a slowdown from the 41 million additions in 2024 when the ad-supported tier was introduced, the growth solidified Netflix's position as the dominant player in streaming entertainment.
Central to the bullish thesis is Netflix's rapidly growing advertising business. Ad revenue topped $1.5 billion in 2025, more than two and a half times the previous year's total, and management has projected roughly doubling to $3 billion in 2026. The company has provided revenue guidance for 2026 of $50.7 billion to $51.7 billion, with an operating margin target of 31.5 percent.
The expected price increases for U.S. subscribers in the fourth quarter align with management's commentary during the earnings call. Netflix executives noted that previous price hikes had been absorbed better than expected with limited impact on customer churn. The company has historically used its content slate as leverage to implement pricing increases without significant subscriber losses.
Citi's price target of $115 is slightly above the consensus analyst target of $113.17, suggesting the firm sees even more upside than the broader Wall Street community. With a forward price-to-earnings ratio of 30.12, Netflix trades at a premium to traditional media companies but below many high-growth technology peers.
The recent stock performance has been particularly notable given the market's initial negative reaction to Netflix's earnings announcement. Shares fell more than 5 percent in after-hours trading following the Q4 report, partly due to concerns about weaker-than-expected guidance for the first quarter of 2026 and investor questions surrounding the company's proposed acquisition of Warner Bros. Discovery assets, which was valued at $82.7 billion. That deal ultimately did not materialize.
Netflix's decision to shift its reporting focus from quarterly subscriber numbers to annual figures and overall engagement metrics reflects the maturation of its business model. The company is increasingly focused on profitability and free cash flow generation rather than pure subscriber growth at all costs.
With $403.8 billion in market capitalization, Netflix remains one of the most valuable media and entertainment companies globally. Its profitability metrics, including a 24.3 percent profit margin and 42.8 percent return on equity, demonstrate the operating leverage in its streaming model as the business scales.
Institutional investors own approximately 84 percent of Netflix's shares, indicating strong conviction among professional money managers. The potential expansion of the share repurchase program, as highlighted by Citi, would return additional capital to shareholders and could provide further support to the stock price.
As Netflix navigates 2026, investors will be watching the evolution of its advertising business, the success of upcoming content releases, and the company's ability to maintain subscriber growth while implementing price increases in key markets like the United States. Citi's initiation suggests the firm believes Netflix is well-positioned to execute on all three fronts.