Netflix price hikes, ad tier to drive growth through 2026, analysts believe

Wedbush analysts reiterated an 'Outperform' rating and a $1,400 price target for Netflix, citing strong Q2 trends and effective monetization strategies, including recent price hikes expected to drive 2025 revenue growth and the ad tier fueling 2026 expansion. Despite Netflix ceasing subscriber reporting, Wedbush's consumer survey indicates stable subscriber growth and increased average revenue per member (ARM) due to a shift towards premium tiers. The firm projects Netflix to exceed Q2 consensus estimates, forecasting revenue of $11.16 billion and EPS of $7.18, alongside significant operating margin expansion to 33.2%, reinforcing the company's dominant market position and promising financial trajectory.

Analysis

Wedbush's reaffirmed 'Outperform' rating and $1,400 price target for Netflix are anchored by a strategic evolution from subscriber acquisition to monetization effectiveness. Despite the cessation of subscriber reporting after a 41 million-member gain in 2024, proprietary survey data from Wedbush suggests stable subscriber trends and, more importantly, a notable increase in average revenue per member (ARM). This ARM growth is driven by a successful strategy of implementing price hikes in key markets and a simultaneous mix-shift toward premium tiers, a move that has not triggered significant churn due to Netflix's extensive content library. The company's growth trajectory is now clearly segmented: price increases are expected to be the primary revenue driver in 2025, followed by the advertising tier in 2026. Ahead of the July 17 earnings release, Wedbush projects Netflix will surpass consensus estimates, forecasting revenue of $11.16 billion and EPS of $7.18, alongside a significant expansion in operating margin to 33.2%, up from 27.2% in the prior-year quarter, reinforcing the thesis of strong pricing power and operational efficiency.

Key Decisions for Investors

• Given the strong evidence of pricing power and expanding margins, investors could view the upcoming July 17 earnings report as a key catalyst to confirm the bullish thesis, with the $1,400 price target suggesting further potential upside.
• Since Netflix no longer reports subscriber metrics, investors must shift their focus to tracking average revenue per member (ARM) and operating margin expansion as the primary proxies for the health and monetization efficiency of the business.
• Longer-term growth is predicated on the success of the advertising-supported tier, so investors should carefully scrutinize management's commentary on its adoption and performance as it is positioned as the primary growth engine for 2026.