Netflix's days of relying on new subscribers to drive growth may be winding down. In a fresh note, analysts at Oppenheimer argue that the streaming giant's next leg of growth will come less from adding viewers and more from raising prices and building out its advertising business. The firm says sentiment around the stock could improve after a rough stretch, as higher prices in the US and UK start showing up in revenue over the coming quarters.
Oppenheimer kept its outperform rating and $85 price target on Netflix, while the stock traded around $72.62. But the note also carried a caution: the firm trimmed its 2027 operating income and earnings per share estimates by 1% and 2%, even as it left its revenue forecast unchanged. That suggests content, marketing, or other operating costs could rise faster than sales, making profit margins the key variable for investors to watch.
From subscriber growth to pricing power
For years, Netflix's growth story was simple: add more subscribers, make more money. But with streaming markets in many regions maturing, the company has shifted its focus. It has introduced ad-supported tiers, cracked down on password sharing, and, most recently, raised prices in the US and UK. These moves are designed to squeeze more revenue out of the existing user base rather than chase new sign-ups.
Oppenheimer expects the ad business to keep maturing, with ad rates gradually moving closer to what peers charge. That's a significant shift. When Netflix first launched its ad tier, it had to offer lower rates to attract advertisers. As the platform proves its reach and engagement, it can command higher prices, which should boost revenue without needing more subscribers.
On the content side, the firm flagged signs of improving engagement and pointed to a deeper 2027 slate, including returning hits like Wednesday and Bridgerton, as well as live events such as the Women's World Cup. Live sports and events have become a key part of Netflix's strategy, drawing in viewers who might not otherwise tune in and giving advertisers a reason to pay premium rates.
Why margins are the real story
The most telling part of Oppenheimer's note may be what it didn't change. The firm kept its 2027 revenue forecast steady but trimmed profit estimates. That implies a higher cost base for the same level of sales. In other words, Netflix is expected to spend more on content and marketing to keep its slate fresh and its ad business growing, and that spending could eat into the bottom line.
For investors, this makes operating margin the swing factor. The question isn't just whether price hikes and ads lift revenue—it's whether they lift revenue without being swallowed by rising costs. If Netflix can grow sales while keeping costs in check, margins expand and the stock looks cheap. If costs spiral, even strong revenue growth might not translate into higher profits.
The unchanged $85 target despite lower earnings per share forecasts is also worth noting. When profit estimates are cut but the price target stays put, the math only works if the market is willing to pay a higher valuation multiple. That kind of multiple support usually requires clear evidence that pricing power and advertising can translate into sustained margins. Without that proof, the stock could struggle to reach Oppenheimer's target.
What it means for everyday investors
For the average investor, this note highlights a broader shift in how streaming companies are valued. The era of rapid subscriber growth is over for many platforms, and the focus has moved to profitability and pricing power. Netflix's ability to raise prices without losing customers—and to build an ad business that rivals traditional TV networks—will be central to its stock performance.
Oppenheimer's view is not a recommendation to buy or sell, but it does offer a framework for thinking about Netflix's future. If you own the stock, watch for signs that margins are holding up as the company invests in content and ads. If you're considering buying, the key question is whether you believe Netflix can grow profits faster than its costs.
Netflix's recent job cuts show the company is already looking to control costs. And the broader market backdrop, including potential rate hikes, could affect how investors value growth stocks like Netflix. Higher rates tend to make future earnings less valuable, which puts even more pressure on companies to deliver strong margins today.
Ultimately, Oppenheimer's note is a reminder that in the streaming business, growth is no longer just about adding subscribers. It's about making each subscriber more valuable—through higher prices, advertising, and content that keeps people watching. Whether Netflix can pull that off without sacrificing profits is the story to watch.
