JPMorgan has resumed coverage of Netflix with an Overweight recommendation and a $120 price target, according to the brokerage's latest report. The decision comes after Netflix chose not to continue competing in a high-stakes acquisition process for Warner Bros., a move that JPMorgan and market participants say highlights the company's discipline on mergers and acquisitions.
Investors appear to have welcomed that discipline. Netflix shares had dropped by more than 18% following the firm's December announcement that it was pursuing Warner Bros., but they have recovered sharply in the wake of Netflix's withdrawal from the bidding contest, rising roughly 24% over the past five trading days.
JPMorgan's analysis values Netflix at about 30 times its projected 2027 earnings of $4.01 per share. The brokerage notes that this multiple represents a premium relative to large-cap technology peers, and it argues the premium is warranted by comparable revenue growth combined with faster profit expansion.
Regarding the bidding process, Netflix declined to match a $31 per share offer from Paramount Global for Warner Bros. Discovery assets, concluding that the proposed transaction was no longer financially attractive. Paramount, having agreed to buy Warner Bros. in a transaction valued at $110 billion expected to close in the third quarter of 2026, will cover the $2.8 billion termination fee owed to Netflix as part of that agreement.
JPMorgan characterizes Netflix as a healthy organic growth story. The firm points to ongoing global subscriber gains, the company's ability to raise prices, and an advertising tier that is still in an early stage of monetization as key supports for continued revenue and profit growth.
On profitability and cash flow, the brokerage expects operating margin to expand to 32% in 2026, with approximately 140 basis points of normalized operating leverage. JPMorgan projects compound annual growth from 2025 to 2028 of 12% for revenue, 21% for operating income, 24% for GAAP EPS and 22% for free cash flow.
For 2026 specifically, JPMorgan forecasts revenue of $51.7 billion, placing that estimate near the top end of Netflix's guidance range for 12% to 14% growth, and anticipates free cash flow of $11 billion, an increase of 16% year over year. The brokerage also expects elevated share repurchases in 2026, a dynamic it believes will be aided by the $2.8 billion termination fee tied to the abandoned Warner Bros. transaction.
Audience engagement metrics are another focus for the firm. JPMorgan notes that viewing hours rose 1% in the first half of 2025 and 2% in the second half, with original content hours accelerating to 9% growth in the latter period. The brokerage expects a robust 2026 content slate and flags the potential for U.S. price increases later this year as additional levers for growth.
Overall, JPMorgan's restart of coverage frames Netflix as a business with solid organic momentum, improving margins and strategic discipline on big-ticket deals, while the market has reacted positively to the company's decision to step away from the costly acquisition contest.