Netflix received a major vote of confidence from Wall Street on Tuesday as HSBC initiated coverage with a Strong Buy rating and a $107 price target, implying approximately 18% upside from current levels. The bullish call comes at a pivotal moment for the streaming giant, which is navigating both a potential transformative merger and questions about its growth trajectory.

The HSBC Bull Case

HSBC analyst Mohammed Khallouf laid out a comprehensive case for Netflix's undervaluation, noting that the stock is trading approximately 33% below its summer 2025 peak despite what he describes as a "sturdy fundamental earnings outlook."

The bank applied a 34x multiple to Netflix's 2026 estimated earnings, arriving at the $107 target. While that multiple might seem rich to some investors, Khallouf argued it's justified by three key growth pillars:

  • Deepening Monetization: Netflix's advertising tier continues to gain traction, with the company now converting more password-sharing crackdown users into paying subscribers than initially projected
  • Improving Profitability: Operating margins have expanded consistently, with the company on track to exceed 25% in 2026
  • Sizable International Opportunity: Emerging markets, particularly in Asia and Latin America, offer substantial subscriber growth potential at improving unit economics

The Warner Bros. Discovery Factor

HSBC's analysis directly addressed Netflix's blockbuster $83 billion bid for Warner Bros. Discovery, announced in December. While some analysts have questioned whether the streaming leader needs such an acquisition, HSBC views the proposed tie-up as "strategically compelling."

The bank acknowledged that Netflix's domestic market is approaching saturation and that competition from user-generated video platforms like TikTok and YouTube is intensifying. However, analysts believe a Netflix-WBD combination "would be a winner" by:

  • Adding premium content libraries including HBO Max originals and Warner Bros. theatrical releases
  • Strengthening Netflix's position in live sports and news programming
  • Creating cost synergies through technology and infrastructure consolidation
  • Providing negotiating leverage with content creators and talent

Stock Performance and Valuation

Netflix closed Tuesday's session at $90.32, up 1.02% on the day. The stock has experienced significant volatility over the past six months, plunging 27.5% from its highs as investors rotated out of high-growth technology names amid rising interest rates and broader market uncertainty.

The current valuation represents a stark contrast to Netflix's all-time highs above $130 reached in mid-2025. Some market observers believe the pullback has created an attractive entry point, while others remain cautious about streaming economics in an increasingly competitive landscape.

"The fundamental earnings outlook remains sturdy, and we see meaningful upside from current levels as the market underappreciates Netflix's ability to continue growing in a maturing industry."

— Mohammed Khallouf, HSBC Analyst

Competitive Landscape

Netflix's position as the streaming industry leader faces ongoing challenges. Disney+, while struggling with profitability, continues to invest heavily in content. Amazon's Prime Video has expanded its offerings, and Apple TV+ has won critical acclaim with premium productions.

However, Netflix maintains significant advantages in subscriber scale, content recommendation algorithms, and global infrastructure. The company's ability to produce hit content across multiple languages and cultures remains unmatched in the industry.

What This Means for Investors

HSBC's initiation adds to a generally positive consensus view on Netflix. The stock currently carries a consensus Hold rating from the broader analyst community, though several firms have recently upgraded their outlooks.

For investors considering Netflix, key factors to watch include:

  • Q4 2025 Earnings: Scheduled for later this month, results will provide visibility into holiday subscriber trends and advertising revenue growth
  • Warner Bros. Deal Progress: Regulatory approval and negotiation updates will be closely monitored
  • Competition: Any pricing changes or content strategy shifts from rivals could impact Netflix's positioning
  • Macro Environment: Consumer spending trends and interest rate expectations will influence valuation multiples

Netflix's upcoming earnings report will be particularly important in validating HSBC's bullish thesis. If the company delivers strong subscriber growth and margin expansion, the path to $107 becomes more credible. Conversely, any disappointment could put additional pressure on a stock that has already retreated significantly from its highs.