Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The Wall Street Journal reported that Netflix NFLX management conveyed operating targets to senior staff that included a doubling of revenue and tripling of operating profit by 2030. The targets include 36% growth in global subscribers (members) and imply advertising will make up 12% of total sales.
Why it matters: The stock rose more than 5% after the report. However, these disclosures seem consistent with management’s previous (though less granular) commentary, and we believe the stock has already priced in this type of growth.
If Netflix achieves these targets and maintains consistent interest and tax rates, the stock would still be trading at 17 times 2030 earnings. Netflix is currently trading at 40 times 2025 and 33 times 2026 FactSet consensus earnings, which include 22% earnings and 13% revenue growth each year.If Netflix can achieve these targets, which would result in compounded annual growth rates of 12% for revenue and 19% for operating profits through 2030, we’d see the stock as fairly valued.
The bottom line: We believe these targets look more like a stretch goal and will be difficult to achieve. We are maintaining our narrow moat rating and USD 700 fair value estimate, which implies an earnings multiple of 24 times consensus 2026 earnings and 28 times 2026 free cash flow.
Our forecast includes CAGRs of 10% and 15% for revenue and operating profit, respectively, and 18% for free cash flow. We project a similar member base as management does but see less room to grow revenue per member, or ARM, where we project CAGRs of 5% in the US and Canada and 3% globally.US and Canada is easily the highest-priced market, and we expect this will see the bulk of advertising revenue, leading to ARM growth. However, we expect member growth to slow substantially and a greater mix shift toward ad-support plans, which we expect would mitigate the boost from advertising.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
