Wells Fargo Downgrades Netflix, Citing a Weaker Slate and Softer Viewing

Netflix shares fell 4.7% in afternoon trading Friday, dropping to $72, after Wells Fargo turned bearish on the streaming company and cut its rating to underweight. It was the stock’s fourth straight loss. The move put Netflix on course for a third consecutive weekly decline and deepened a slide that has run through most of September.

A thinner slate and fewer hours watched

The downgrade came from analyst Steven Cahall, who moved Netflix to underweight from equal weight and set a price target of $57. That figure is a fifth below where the stock traded Friday afternoon. Cahall also cut the multiple he is willing to pay for the company’s earnings, to 15 times forward profit from 21 times, and trimmed his 2027 and 2028 profit estimates.

The argument rests on what people are actually watching. Wells Fargo estimated that Netflix viewing ran to 1.6 hours per subscriber a day in the first half of the year, which the firm calculated was down 8% from 2023 once password-sharing changes and geography were stripped out. The bank also expects hours from the service’s 100 biggest original titles to fall 21% in the second half from a year earlier, and it pointed to a U.S. television share that has slipped under 8%. The firm’s view is that the shortage of must-watch originals already shows up in the viewing data, and that thinner engagement eventually feeds through to subscriber growth and pricing power. Fewer hits, fewer reasons to watch.

The slide began before Friday

The call landed on a stock already worn down. Netflix had lost 14% over the past three months heading into Friday, though the past month had been closer to flat. At $72, the shares trade 46% below their 52-week high near $134 and about 10% above their 52-week low. The stock is down almost 30% this year and close to 40% over the past twelve months.

Volume backed it up. By early afternoon, more than 44 million shares had changed hands, well above the stock’s recent daily average of about 27 million, the kind of turnover that follows a rating change rather than a quiet session.

The lone bear on a bullish street

For now, Wells Fargo is the outlier. The average 12-month price target across the roughly 50 analysts who cover Netflix sits near $94, well above Friday’s price, and most of them still rate the shares a buy. Those targets run from $70 at the low end to $135 at the high. None rated the stock a sell. The distance between that consensus and the new underweight call is the disagreement the downgrade opened: whether the recent weakness is a stumble in the content pipeline or the start of something structural.

The January report is the real test

Cahall singled out one date. The viewership report Netflix publishes alongside its fourth-quarter results in January will show whether the engagement slippage he described holds up in the company’s own numbers. Before that, Netflix’s next quarterly report will give investors a fresh look at subscriber growth and the price increases the company has leaned on to keep revenue climbing. On Friday, sellers were acting on the bearish case well before either report arrives.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.