Netflix Stock Breaks $1,000 Post-Earnings: Goldman Flags Valuation Stretch

Netflix Inc. NFLX shares soared 15% in premarket trading on Wednesday, hitting $1,000 after the streaming giant reported fourth-quarter earnings that smashed Wall Street expectations on revenue, profitability, and subscriber growth.

In a note on Wednesday, Goldman Sachs analyst Eric Sheridan raised the 12-month price target on Netflix stock from $850 to $960, citing expansion into live entertainment, the growing success of its ad-supported tier, and strategic price increases.

Yet, the investment bank opted to maintain a Neutral rating, indicating that the stock's recent gains already reflect much of its future growth potential.

Earnings Beat, Subscriber Growth Accelerates

Netflix reported fourth-quarter revenue of $9.88 billion, beating analyst forecasts even as a stronger U.S. dollar created foreign exchange headwinds. Operating income climbed to $2.63 billion, exceeding expectations and underscoring the company's improving profitability.

A key driver of growth has been Netflix's ad-supported tier, which saw a 30% quarter-over-quarter rise in subscribers and accounted for more than 55% of new sign-ups in markets where it is available. The trend signals a strategic shift, with the company focusing less on sheer subscriber numbers and more on revenue diversification.

Netflix also ramped up capital returns, buying back $1 billion in shares in the fourth quarter. Its board approved an additional $15 billion in share repurchases, reinforcing management's confidence in the company's long-term trajectory.

Goldman Sachs: Valuation Now a Concern

Netflix’s ability to “sustain double-digit revenue growth with room to expand margins in the coming years,” led Sheridan to raise his price target on Netflix to $960.

Yet, he stopped short of upgrading the stock, warning that Netflix's rapid price appreciation, up by over 35% since the third quarter’s earnings report, has made risk-reward less compelling.

Sheridan indicated that while Netflix is executing well, the stock has already surged sharply since its last earnings report, far outpacing the broader market.

With the latest rally pushing shares to $1,000, Goldman believes much of the company's long-term growth potential is already reflected in the price.

What's Next for Netflix?

The company expects first-quarter 2025 revenue of $10.42 billion, slightly below analyst estimates, and projected free cash flow of about $8 billion for the full year, lower than Goldman's previous estimate of $8.7 billion.

Investors now face a key decision: Is Netflix's stock still an attractive buy after its meteoric rise, or has the rally outpaced its fundamentals? Goldman Sachs appears to lean toward the latter, even as Wall Street cheers the latest earnings win.

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