Rosenblatt raises Netflix stock price target to $96 on buybacks By Investing.com

Rosenblatt raised 2026 adjusted EBITDA to $17.4B (+2%) and adjusted EPS to $3.28 (+3%) while bumping its price target to $96; Netflix shares trade at $98.66 and at an EV/EBITDA of 31.07 versus Rosenblatt's 24.5x valuation reference. Goldman Sachs upgraded to Buy with a $120 target (~26% upside) and BofA reiterated Buy with a $125 target; Needham estimates the U.S. price hikes will add ~$1.7B in revenue and ~300bps to North American growth in FY2026. Rosenblatt also assumed higher share repurchases after Netflix received a $2.8B break fee from the terminated Warner/HBO deal; key risk remains audience retention amid competition from YouTube, FAST services and short-form social content.

Analysis

Netflix’s recent moves create a classic execution vs. expectation setup: management has newly available capital and is routing it toward shareholder returns and growth initiatives, which mechanically compresses share count and can lift EPS even if top-line engagement only inches forward. That dynamic partially decouples headline subscriber metrics from earnings-per-share trajectory, so valuation will be increasingly driven by buyback cadence and ARPU mix rather than pure subscriber growth.

The push into live sports and expanded rights bidding is a structural inflection with two second-order effects: (1) it ratchets up industry-wide rights inflation, pressuring content spend for smaller streamers and linear incumbents; and (2) it front-loads engagement upside but also carries multi-year amortization and capex implications that can sap free cash flow if monetization (ads + higher ARPU tiers) underperforms. Concurrently, accelerating competition from short-form and creator ecosystems is a discovery/retention risk — forcing Netflix toward creator partnerships and ad formats that will blunt long-term margin profile versus a pure subscription model.

Time horizons matter: days-to-weeks — the next quarterly print will be a volatility catalyst around retention, ad RPMs, and buyback guidance; months — the pricing and repurchase cadence should show throughput in ARPU and adjusted EBITDA; 12–24 months — sports investments will reveal whether engagement lifts justify elevated content cost and whether ad monetization scales without steep CPM cyclicality. Tail risks include a cyclical ad downturn, unexpected churn from price elasticity, or a bidding war for sports rights that converts a temporary engagement boost into permanently higher content capex.

Key Decisions for Investors

• Diagonal call-spread (directional, hedged): Buy Jan-2027 NFLX 120/200 call spread (~12–18 month horizon) financed by selling 1–2x near-term (next 3–6 month) calls to fund cost. Position size 1% portfolio; max loss = premium paid (~1% PF), upside asymmetry 2–4x if buybacks + ARPU beats expectations over 12–18 months.
• Earnings-volatility trade (short-term, event driven): Ahead of the next quarterly print, buy a small long strangle (e.g., weekly/monthly OTM calls and puts) sized 0.2–0.5% portfolio to capture a skewed move. This isolates headline-miss/beat risk without committing to directional fundamental view; close immediately post-print to avoid IV crush.
• Pair trade (relative value, 6–12 months): Go long NFLX equity (1% PF) vs short Paramount Global (PARA) equal notional (1% PF) — rationale: Netflix captures incremental subscription/ad dollars and sports-driven engagement, while ad-dependent PARA faces CPM cyclicality and rights-cost pressure. Expected asymmetry: Netflix outperformance if ad monetization holds and ad dollars reallocate.
• Protective put spread (insurance, 12 months): Buy 12-month NFLX 25–30% OTM put spread, size 0.5–1% portfolio to cap downside in case of ad recession or runaway content cost. This limits drawdown tail risk at controlled cost while keeping upside exposure from buyback-driven EPS improvement.