Citi has resumed coverage of Netflix with a Buy rating and a 115 dollar price target, which implies roughly 5 to 17 percent upside over the next 12 months. The call rests on three pillars: room to lift profitability, more use of pricing power in core markets and a step up in capital returns via buybacks.
Rather than betting on a new narrative, Citi points to the gradual shift in Netflix’s model from pure subscriber growth to a focus on operating margins, revenue per user and free cash flow. In its updated post Q4 2025 model, the bank raises revenue and EBIT margin assumptions and expects 2026 operating margins to come in above the Street, while remaining conservative on long term advertising revenue and treating ads as an additional upside lever, not the foundation of the thesis.
How Citi views today's Netflix
Citi $C sees Netflix $NFLX as a streamer that has entered a new phase: the pace of user growth is no longer the main driver, but the company finally has the scale to monetize its catalog and platform to the fullest. Crucially, after years of massive investment in content and global expansion , the numbers are starting to work more in favour of margins.
Citi's commentary highlights three pillars:
The opportunity to raise EBIT guidance for 2026.
Room for price appreciation in the US in 4Q26.
And higher returns on capital due to the absence of large acquisitions and strong cash flow.
The bank sees advertising as an important complement, but not the only valuation driver. This is why it can afford to have an advertising scenario more conservative than consensus and still stick with a "buy" recommendation.
3 reasons to buy:
1) Higher profitability than the market expects
The first reason is to look at operating margins and EBIT. Citi expects Netflix to be able to increase its EBIT for fiscal 2026 and that the actual margin will be about 40 basis points above current consensus.
It relies on:
Stabilizing content costs - Netflix has already made its largest investments and experiments.
Better catalog utilization across regions.
Greater efficiency in marketing and distribution, with the company "burning" less on chasing each new user and benefiting more from its existing base.
Higher margins are key to valuation because even a relatively small shift of a few tenths of a percentage point in operating margin translates into billions of extra in operating profit for a company the size of Netflix.
2) U.S. price appreciation as a revenue catalyst
The second catalyst is expected price appreciation in the U.S. in the fourth quarter of 2026. Citi projects that Netflix still has pricing power, especially in the U.S., where:
It is one of the main "must-have" services.
Has a high rate of daily usage.
and offers a broad mix of series, movies and live content.
Slight price increases in a key market:
goes virtually entirely to revenue.
only minimally increases variable costs.
and, with good timing and communication, may not significantly increase churn (subscriber attrition).
For Citi, it's a clear "mechanical" catalyst - even without dramatic subscriber growth, Netflix can move revenue and profitability higher just by asking a little more for a product that users already consider standard.
3) More cash for shareholders
The third reason is capital policy. Citi points out that Netflix hasn't made any big acquisitions recently, which frees up room for higher returns on capital - especially share buybacks.
The bank argues that:
Netflix'scash flow is strong enough today.
The company does not have "transformational" M&A (stock splits) on the table.
and can afford to increase buybacks and other forms of distribution without jeopardizing content and technology investments.
In an environment where investors increasingly value a combination of growth and disciplined capital management in large technology titles, a stronger buyback program is a clear plus. For Netflix, moreover, buybacks are directly accretive to earnings per share if margins and revenues can be kept on an upward trajectory.
Advertising as a risk, not as a core thesis
Citi also points out that the long-term outlook for advertising revenue is a risk on the expectations side. Consensus reckons Netflix will build an advertising business of around $11bn a year by 2030. Citi is more skeptical and sees a more realistic scenario around $9 billion, with annual growth of about $1.5 billion, not $2 billion, from 2027 onward.
One point that is important for investors: Citi is building its positive thesis to hold up even in a weaker ad scenario. The main drivers it is banking on are margins, pricing and capital discipline, not just an optimistic advertising revenue curve.