Can Netflix Chill Despite the Trump Tariffs?

Will streaming platforms take a hit from a Squid Game-style tariffs war kicked off by Donald Trump? Or will Netflix & Co. be mostly spared from the roiling disruption throughout the global economy? One of Wall Street’s notable analysts has been pondering that question often in recent weeks.

“There’s been some noise around the impact of tariffs, churn post the X-Mas NFL games, and declining engagement,” Bernstein’s Netflix analyst Laurent Yoon wrote in a report in mid-March, possibly referencing the streaming giant’s multiday stock slide after a rival analyst suggested that a gain from turning password-borrowers into paying customers had possibly run its course.

On Wednesday, the day after what Trump has dubbed “Liberation Day,” the Wall Street expert returned to the topic. Yoon acknowledged his recent focus on the theme in his opening like: “Yet another note on tariffs, but it’s hard to chill these days.”

Yoon went on the highlight that Netflix has become familiar with tariffs, “having paid DST (Digital Services Tax) in European markets,” including the U.K., France, and Spain, since its implementation in 2019. “However, the sweeping rhetoric on tariffs and options for retaliatory actions by the European countries have raised questions about whether Netflix (and other digital services providers) could face incremental taxes and whether this could hinder Netflix’s growth trajectory in key markets.”

The Bernstein analyst then offered three key arguments for Netflix that could allow it to avoid penalty levies. “Netflix is good for Europe, or so Netflix could argue,” was his first take, emphasizing that Netflix has thousands of full-time equivalent jobs in the Europe, Middle East and Africa region, “invested billions in European content (supporting Europe’s media ecosystem) and abided by local regulations that vary by country (e.g. DST, re-investments in local market, etc).” But would this matter if Europe imposed “sweeping retaliatory tariffs” on U.S. digital services?” Yoon wondered. His conclusion: “Probably not.”

What’s the alternative? “Netflix is the top SVOD service in the five largest markets in Europe (Germany, U.K., France, Italy, Spain), followed by Amazon Prime Video and Disney+ in most markets,” the analyst pointed out. “Imposing tariffs on American services would imply price increases for the top three SVODs in these markets and, if imposed, tariffs may hurt local consumers more than the service providers.”

All that said, no European countries have so far unveiled retaliatory duties on U.S. companies. “We will revisit [our Netflix financial] model and reflect the impact when and if a meaningful retaliatory tariff is imposed on U.S. digital services,” Yoon wrote.

In line with this, he maintained his “outperform” rating on Netflix shares with a $1,200 stock price target.

The Bernstein expert still tried to assess the potential financial impact of possible future tariff moves. “We recognize that general sentiment alone could be a potential headwind for Netflix, and others, in Europe, and an added cost burden on the consumer could potentially exacerbate the situation,” Yoon wrote. “In the event of slower growth in what is perhaps the most important growth market for Netflix, there are risks to earnings per share downside near-term.”

But he also concluded: “A potential headwind still implies upside from here. … Even with a 30 percent deceleration in Europe, Middle East and Africa (EMEA) subs growth and flat average revenue per member, we believe Netflix is worth comfortably north of $1,000 in a stable market.”

Outlining his forecasts for Netflix’s penetration growth in European markets driven by local content investment, Yoon models growth in EMEA subscribers from 101 million in 2024 to 120 million by 2026, reflecting a 9 percent compound annual growth rate. “However, if a tariff is introduced and increases the cost of Netflix in Europe, it could lead to higher churn and further deceleration in subscriber growth,” the analyst said. A tariff could also impact Netflix’s average revenue per member (ARM) growth in the region. Plus, “with the tariff increasing the monthly cost of Netflix, it may limit Netflix’s ability to raise prices in these markets.”

Yoon’s current model projects a 5 percent compound annual growth rate in Europe, the Middle East and Africa for subscription average revenue per member. But if it remains unchanged through 2026 due to a tariff, the overall ARM compound growth could swing to a drop of 2.7 percent, he suggested.

“Combining the effects on both subscriber and ARM growth, we estimate a potential downside of 10 percent to our 2026 earnings per share forecast” of $36, the analyst concluded. “However, given Netflix’s dominant competitive position in European SVOD markets, we expect the impacts on both subscriber and ARM growth to be less severe, with a downside to our 2026 earnings per share estimate likely in the mid-to-high single-digit range.”

As is tradition, Netflix will kick off Hollywood earnings season after the market close on April 17, with investors set to keep a close eye and ear out for possible management commentary on the tariffs impact.