Netflix (NFLX) shares experienced renewed pressure after Wells Fargo downgraded the streaming company's stock to Underweight from Equal Weight, reducing its price target to $57 from $80. This downgrade, issued on September 18, made Netflix's stock fall more than 20% for the year, putting it on track for its worst year since 2022. The firm cited a weaker original content slate for the second half of 2026, which includes the final season of "Stranger Things," leading to expected lower engagement rates compared to prior periods. Wells Fargo also cut its 2027 and 2028 EPS estimates to $3.77 and $4.52, respectively, noting that Netflix's 2027 EPS growth is slower than the S&P 500's consensus. This $57 price target is based on 15 times expected 2027 earnings, a reduction from the previous valuation of 21 times earnings.
Wells Fargo's analyst Steven Cahall based his downgrade on an analysis of over 150 key Netflix titles and estimated that total second-half viewing hours would decline 4% year-over-year to 96 billion. More specifically, viewing hours for the Top 100 Netflix Originals are projected to drop over 20% year-over-year. Cahall also noted a 3% decline in hours per subscriber per day for Top 100 Originals in the first half of 2026, and an 8% overall Netflix viewership decrease compared to the first half of 2023. He warned that falling viewing could lead to increased churn before impacting revenue, though Netflix no longer reports subscriber numbers or churn directly.
Separately, HSBC also downgraded Netflix from a "Buy" to a "Hold" rating, setting a $76 price target, which implies only a 3.6% upside from the stock's current price. Despite these downgrades, the consensus among analysts remains a "Moderate Buy" with an average price target of $95.51. Netflix recently reported stronger-than-expected quarterly EPS of $0.80, beating estimates by $0.01, and a 13.4% year-over-year revenue growth. Other analysts have recently issued more optimistic price targets, with Needham at $120, Bank of America at $105, and Evercore ISI at $110, the latter raising its target due to multi-year highs in penetration rates in the U.S. and Japan. Wells Fargo's concern about share loss to YouTube was also countered by Nielsen data showing Netflix's share hovering around 8%, on par with previous months, while Disney and Paramount lost streaming share against YouTube.
