As we move into earnings report season, you can see the clear change in sentiment towards Netflix (NASDAQ:NFLX). But this is not coming from the retail side.

Institutional investors and Wall Street experts are now the ones leaning bullish again. Usually, when this happens, it's wise for investors to pay attention.

So what exactly are they seeing? Let's break it down.

Wall Street Is Raising Its Expectations

One of the most obvious indicators of this change is the upgrade on Netflix by Goldman Sachs' (NASDAQ:GS) analyst, Eric Sheridan, to a "Buy" rating.

The price target was increased to $120, which means upside potential from here on out. So what makes Eric so sure of this potential? Well, he points out that things have changed due to one thing: the risk/reward has become more attractive.

Netflix is no longer being seen by institutions as a high-risk bet. Instead, it's starting to look like a company that has figured out its model. Now you can see the firm has a steady execution plan and is improving monetization.

That’s precisely the kind of thing that institutional money is usually looking for as earnings approach.

When major investment banks upgrade a stock just weeks before earnings, it often means confidence in the upcoming results.

Interestingly, Goldman Sachs isn't the only firm seeing this potential surge. But before we go into other firms, let’s understand why there are now bullish expectations.

Netflix Has Started to Look Beyond Just Streaming

If you step back for a second, you'll realize that Netflix is not just a streaming service anymore.

Sure, content will always be the backbone, and Netflix Originals and new launches will keep making headlines. But that's not where the true story lies.

We're now seeing expansion into:

  • Live programming
  • Gaming
  • Creator-led content

Each offers new opportunities for engagement loops, but more importantly, new revenue streams.

Then there is advertising, which may very well be the biggest unsung hero of the whole story.

Netflix's ad tier is picking up steam, and the initial moves suggest a high level of interest. The more subscribers who take up lower-priced plans, the more chances Netflix will have to earn from them twice, once as a subscriber and again through advertising.

Eventually, it will even out the revenue difference between advertisers and premium users.

Walking Away From Warner Bros May Have Been the Right Move

Interestingly, one of the most bullish developments for Netflix recently came from a deal that never happened.

At face value, pulling back from such a major acquisition might appear to be a blunder for Netflix.

The market had other ideas.

In fact, when Netflix abandoned the pursuit of Warner Bros. Discovery (NASDAQ:WBD) and left it to Paramount Skydance, the market reacted positively to the decision.

Netflix had realized at that point that the deal was not in their best financial interests despite having initially viewed it as a good strategy for their business.

Rather than spending more than necessary, the company walked away from the deal while collecting a $2.8 billion breakup fee in return.

That move did two things:

  • It proved their capital efficiency
  • It cleared a huge overhang from the stock

As a result, the stock soared in the days following the news.

Institutional Investors Are Increasing Their Bets

As I earlier shared, it's not just Goldman turning bullish.

Jefferies (NYSE:JEF) also repeated their ‘Buy' recommendation but gave an even higher target price of $134. This shows that there is still more upside potential if Netflix provides positive earnings guidance.

According to their experts,

  • Price increases are starting to flow through
  • Revenue growth remains solid
  • Margins are improving

Also, companies such as Western Financial Corp CA have been actively seeking to expand their positions in it.

The company holds more than 25,000 shares valued at more than $2.3 million according to its recent regulatory filings. This represents a 300% increase. This can be counted as a VERY major move.

When you start seeing multiple institutions moving in one direction, you know for sure that something is up.

The Numbers Heading Into Earnings Look Strong

Now let's talk about what really matters: the numbers.

Netflix reported solid growth for 2025

  • Revenue grew double digits YoY
  • Operating income grew at an even faster pace
  • Free cash flow soared
  • Subscribers exceeded 325 million

What is even more astounding is that the annual free cash flow in 2025 was reported at $9.46 billion, representing an almost 37% rise over last year’s figures.

This is just some of the reasons why analysts expect the company to once again exceed their forecasts with the latest set of earnings.

However, perhaps the biggest contributor to Netflix’s growth is the ad business.

Only three years into its ad tier, the division already recorded $1.5 billion in revenues back in 2025, and the company expects the figure to double to about $3 billion next year.

And here’s what is making all of that possible for Netflix.

Netflix currently has its own advertising tech stack. This means it controls pricing, targeting, and profits, something other companies have no choice but to pay external vendors for.

Price Increases Haven't Hurt Demand

One of the biggest fears around Netflix has always been churn; raise prices too much, and users leave.

But the data shows that around 44% of subscribers who cancel eventually return within a year.

Others simply downgrade to cheaper plans instead of leaving entirely. Either way, they stay within the ecosystem. And that's an advantage.

Instead of having to “win” or “lose” subscribers, Netflix just has to make sure that those users remain within its ecosystem, be it in premium or ad-supported versions of the service.

Research from MoffettNathanson also found that Netflix stands out as offering the lowest cost per hour of entertainment among all streaming competitors.

In other words, consumers still see Netflix as one of the best entertainment values available.

So Should Investors Buy NFLX Now?

Given all of this, it is easy to see why Wall Street has a positive outlook on the firm.

Approximately 73% of the analysts rate the stock as either a Buy or Strong Buy due to their confidence in the company's potential for growth in the future.

From a valuation point of view, Netflix is currently trading at around 38 times earnings, which sounds quite pricey. However, this valuation is below its three-year average of about 45 times earnings.

Forward valuations are much more favorable, with the company trading at around 30 times earnings due to its projected revenue growth rates.

However, trying to time earnings is essentially guessing how the market will react. The question here should actually be, Are you ready for the long game?

Because if you are, then the timing of the purchase is really irrelevant.

The stock remains fairly valued and even slightly undervalued compared to its former price. For a company that keeps growing its revenue base and building new monetization models, this valuation appears quite reasonable.

In my view, the bulls' case gets stronger every day, and the money agrees. The only question left is whether you want to wait for confirmation or get in before the crowd catches on.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.