The Wall Street Journal reported that Netflix (NAS: 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 that advertising will make up 12% of total sales.

The stock rose more than 5% after the report, but 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.

Priced for near perfection?

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, or CAGRs, of 12% and 19% for revenue and operating profit, respectively, through 2030, we’d currently see the stock as fairly valued.

We believe these targets look more like a stretch goal and will be difficult to achieve. We are maintaining our narrow moat rating and $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.

Past US growth could be hard to match

The 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.

Netflix already has 90 million US and Canada members, representing nearly 65% of households and reaching levels approaching the peak of pay-TV subscribers, which we estimate to have been around 110 million across US and Canada at the beginning of last decade (and over 80% penetration).

We believe the comparison underrepresents Netflix’s true penetration because, unlike with traditional pay-TV subscriptions, members can share Netflix accounts between households. The firm’s paid sharing plan-add-on allows this.

We believe the US market has just been through a period of member growth that it will never again achieve, which included tailwinds from a password sharing crackdown and entry into live sports, including NFL games for the first time last quarter. Netflix added more than 15 million US and Canada members over the past two years, its best two-year period in at least the last decade, and US and Canada revenue still grew only 17% in 2024 and 6% in 2023.

Better advertising monetization can keep US and Canada growth near double digits even without such growth in members, but we think international markets will need to carry a heavier load to keep sales growth at a mid-teens rate.

Ad revenue growth may not be enough

We agree that ad revenue is a source of growth, but we don’t think management’s anticipated $9 billion by 2030 will be enough to bring total revenue to $78 billion, as the firm targets. At 410 million members by 2030, management’s revenue and member targets imply a 6.5% ARM CAGR globally from 2024 to 2030.

We don’t know the precise level of current advertising revenue, but if it were currently around $1.5 billion—in the range that eMarketer estimates—Netflix’s 2030 total sales target would still require about 5% annual ARM growth from subscription fees alone, which we think is unrealistic.

First, to achieve the advertising revenue, we’d expect a continuing shift in the member base to lower-cost ad-supported plans. In the US, for example, where ARM was $17.20 in 2024, ad-supported plans are $10 less each month than standard ad-free plans. Second, with less opportunity for new member growth in the US, there will need to be a mix shift to other regions to achieve such high member growth.

Based on membership levels of 50 million-60 million in each region, we believe Latin America and Asia-Pacific, where ARM in 2024 was $8.24 and $7.29, respectively, have the most opportunity. In Europe and the Middle East, where there were over 100 million members at the end of 2024, ARM was under $11.

As supported by our projection for 8 percentage points of operating margin expansion by 2030, we see similar opportunities for operating leverage that the firm does.

We suspect our lower revenue projection explains some of the 4-percentage-point gap versus what management’s targets imply. We expect content costs, which are by far Netflix’s biggest expense, will need to rise at a mid- to high-single-digit annual rate for the firm to maintain double-digit sales growth, especially if it needs to rely on compelling content in international markets.

A potential speed bump

Adding to our skepticism to revise our forecast upward is the potential for an economic slowdown, which we think will slow growth. We don’t expect Netflix to be significantly impacted by tariffs, and we believe Netflix’s service will hold up pretty well in a recession.

We believe members get a lot of value from Netflix subscriptions based on the relatively low price they pay compared with other forms of entertainment. However, we would expect some members to cancel subscriptions if they need to cut personal expenditures, and advertisers typically slow spending in periods of macroeconomic weakness.

As Netflix doesn’t yet have a material amount of advertising revenue, this should not dent the firm’s current business. However, we’d at least expect the spending slowdown to cause a hiccup on the path to the $9 billion in advertising revenue that management targets by 2030.

Netflix (NAS: NFLX)

  • Moat Rating: Narrow
  • Fair Value estimate: USD 700 per share
  • Share price April 15: USD 976
  • Star rating: Two stars

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