JPMorgan initiated coverage of Netflix with an Overweight rating and a $120 price target after the streaming giant walked away from a costly studio acquisition battle. Investors rewarded Netflix for its disciplined approach to mergers and acquisitions, with shares rebounding 24% in five days following the exit from the Warner Bros bidding war.

Netflix shares had fallen 18% since announcing its pursuit of Warner Bros in December, but the company's decision to decline Paramount's $31 per share offer for Warner Bros assets signaled financial prudence. The streaming service is valued at about 30 times 2027 earnings of $4.01, a premium to large-cap tech peers justified by similar revenue growth and faster profit expansion.

The brokerage projects robust growth metrics through 2028, including 12% compound annual revenue growth, 21% operating income growth, and 24% GAAP EPS growth. Netflix expects operating margins to expand to 32% by 2026, with $11 billion in free cash flow and elevated share repurchases supported by the $2.8 billion termination fee from the abandoned deal.