Netflix and ServiceNow: Assessing the 48% and 80% Upside Targets Behind Their Stock Splits

The specific upside targets of 48% for Netflix and 80% for ServiceNow are not pulled from thin air. They are grounded in the companies' scalable total addressable markets and their proven ability to execute on powerful secular trends. The stock splits themselves are a secondary signal of management confidence, not the primary driver of intrinsic value.

For Netflix, the Jefferies analyst's $134 price target implies roughly 48% upside from recent levels. This valuation is built on the company's relentless growth trajectory in global streaming and its successful ad-tier expansion. Despite a recent earnings miss tied to a Brazilian tax issue, the core business remains robust. The company delivered record revenue of $11.5 billion last quarter, marking its strongest growth since 2021, and raised its full-year revenue outlook. Its strategy of using profits to fuel content and its focus on advertising sales, which it says is on track to more than double this year, are key pillars of that growth narrative. The upside target reflects confidence that these trends will continue to drive market share gains and revenue scaling.

ServiceNow's path to its implied 80% upside is supported by a different but equally compelling dynamic. The company's 5-for-1 stock split, approved in December, is a clear signal of management's confidence following years of strong performance. The split itself is a neutral event that increases the share count but does not alter the company's intrinsic value. The real story is the massive enterprise workflow automation market it serves. ServiceNow's platform, which orchestrates over 75 billion workflows annually, is positioned at the center of business reinvention. Its AI control tower capabilities are designed to scale across complex enterprise operations, providing a durable moat and a large TAM to capture.

The bottom line is that the stock splits are catalysts for accessibility and sentiment, but the growth thesis for both companies is about market dominance. Netflix's global streaming and ad business offers a clear path to scaling revenue, while ServiceNow's enterprise workflow platform provides a scalable engine for recurring revenue. The specific upside targets are the market's current assessment of how much of that massive potential remains untapped.

Market Position and Scalability Drivers

The path to the implied upside for both Netflix and ServiceNow is paved by their dominant positions in massive, high-growth markets and the structural advantages that make their models inherently scalable. Their ability to capture market share and sustain high growth rates hinges on these foundational strengths.

ServiceNow operates at the epicenter of a powerful secular shift: the digital transformation of enterprise operations. The company's platform functions as a central 'control tower' for business processes, orchestrating over 75 billion workflows annually. This positions it within the high-growth enterprise workflow automation market, a segment targeting a massive global enterprise software TAM. Its AI-driven capabilities are designed to scale across complex, multi-year enterprise contracts, creating a durable moat. The platform's embedded nature in critical business operations generates powerful network effects and high switching costs. Once integrated, replacing ServiceNow's system is a costly, disruptive endeavor for clients, which directly enhances customer retention and provides a predictable, recurring revenue stream essential for long-term growth.

Netflix's growth engine is fueled by three converging trends in the global entertainment landscape. First is the continued expansion of streaming penetration into new markets and demographics. Second is the aggressive monetization of its ad-tier, which it says is on track to more than double this year from a relatively small base. Third is diversification into live events and branded content, which broadens its revenue mix and deepens engagement. Together, these drivers target a vast global entertainment TAM. The company's strategy of using profits to fund content and its focus on advertising sales are key levers for scaling revenue. Its platform also benefits from network effects; as more users join, the value of its content library and ad inventory increases, making it harder for competitors to gain traction.

For both companies, these market positions are reinforced by scalability drivers that protect growth. ServiceNow's enterprise software model, once deployed, can be scaled to new departments and geographies with minimal incremental cost, driving high-margin expansion. Netflix's digital delivery model similarly offers near-zero marginal cost for serving an additional subscriber, allowing its revenue growth to far outpace its cost growth. The high switching costs inherent in both platforms-whether it's a company's entire IT workflow or a user's entertainment ecosystem-act as a powerful retention engine. This combination of a massive TAM, a scalable delivery model, and sticky customer relationships is the structural foundation that supports the high-growth trajectories and justifies the specific upside targets analysts are assigning.

Financial Impact and Valuation Scenarios

The growth drivers for both companies must now be tested against financial performance and valuation. The stock splits themselves are neutral events, but the markets will judge the underlying business models on their ability to convert scalability into sustained revenue growth and profitability.

For ServiceNow, the 5-for-1 split increases the share count and improves liquidity, but the valuation premium for enterprise software hinges entirely on future execution. The company's platform, which orchestrates over 75 billion workflows annually, is built for high-margin expansion. Its AI control tower capabilities are designed to scale across complex, multi-year enterprise contracts. The key metric for investors is forward revenue growth. The stock's premium valuation demands that ServiceNow continues to capture market share in the massive enterprise workflow automation market, turning its platform dominance into consistent top-line acceleration and expanding profitability. The split-adjusted share count may make the stock more accessible, but it does not alter the fundamental requirement to meet or exceed growth expectations.

Netflix faces a similar test, where its premium valuation demands flawless execution. The company's Q4 guidance projects 16.7% revenue growth, which is solid but must be delivered consistently. The recent earnings miss, tied to a Brazilian tax dispute, highlights the vulnerability of its margin expansion targets. To justify the 48% upside, Netflix needs to demonstrate that its ad-tier growth-on track to more than double this year-and its AI-driven ad innovation can offset any volatility in its core subscription business. Its strategy of using profits to fuel content is a proven growth lever, but margin pressure from content spend and one-time expenses could threaten the operating margin trajectory. The stock's premium is predicated on a seamless transition to a higher-growth, higher-margin model.

Historically, successful companies that enact stock splits see an average gain of 25% in the year following the announcement, a benchmark that underscores the market's positive sentiment toward proven growth stories. However, future returns are not guaranteed. They are contingent on the company's ability to meet or exceed the growth expectations embedded in its current valuation. For both Netflix and ServiceNow, the path to the implied upside targets requires translating their massive TAM and scalable platforms into predictable, accelerating financial results. Any stumble in execution would quickly erode the premium attached to their growth narratives.

Catalysts, Risks, and What to Watch

The path to the implied upside for both Netflix and ServiceNow is now set against a backdrop of near-term catalysts and persistent risks. The stock splits have made the shares more accessible, but the real test is whether the companies can deliver on the growth narratives that justify their premium valuations.

For ServiceNow, the immediate catalyst is the continued adoption of its AI features and expansion into new verticals. The company's platform, which orchestrates over 75 billion workflows annually, is built for high-margin expansion. Its AI control tower capabilities are designed to scale across complex, multi-year enterprise contracts. To validate its enterprise software valuation and support the 80% upside, investors must see this technology driving new deal wins and cross-selling within existing accounts. The 5-for-1 split, approved in December, is a neutral event that increases liquidity but does not alter the fundamental requirement to meet or exceed growth expectations. The stock's premium is contingent on ServiceNow capturing more market share in the massive enterprise workflow automation market.

Netflix's near-term catalysts are twofold. First, the company must resolve the Brazilian tax dispute that caused an earnings miss last quarter. The expense, stemming from a 10% tax on certain payments, was not in the forecast and pressured the operating margin. Management stated it does not expect a material impact going forward, but the episode highlights the vulnerability of margin targets to one-time events. Second, execution on its ad and live content strategies is critical. The company is on track to more than double its ad revenue this year from a small base, and it is using AI to test new ad formats. To validate the 48% upside case, Netflix needs to demonstrate that this ad-tier growth, combined with its AI-driven ad innovation, can offset any volatility and consistently hit its 2026 growth targets. The stock's recent 32% decline from its 2025 peak underscores the market's sensitivity to any stumble.

Key risks loom over both paths. Macroeconomic sensitivity could pressure enterprise software spending for ServiceNow and discretionary entertainment budgets for Netflix. Competitive intensification in streaming is a constant threat, with new entrants and traditional players vying for attention. Most critically, the potential for growth to decelerate from current high rates is the biggest risk to the upside targets. Both companies are priced for continued acceleration. If their massive TAMs are tapped faster than expected, or if scaling becomes more costly, the premium attached to their growth narratives could quickly erode. The stock splits are a sign of confidence, but the market will judge them on the financial results that follow.