Netflix possibly hit a wall, Wells Fargo cuts Netflix rating on engagement risk, weak slate

Wells Fargo downgraded Netflix to Underweight from Equal Weight in a note Friday, warning that softening viewer engagement and a weaker content slate could pressure the streaming giant’s margins and valuation.

Analyst Steven Cahall cut his price target for the stock to $57, implying about 25% downside, and lowered his valuation multiple to 15 times forward earnings from 21 times.

He said the January viewership report, due with fourth-quarter results, is the negative catalyst.

Cahall added that Netflix’s engagement trends look worrying, with viewing at 1.6 hours per subscriber a day in the first half, which he estimated was down 8% from 2023 after adjusting for a password-sharing crackdown and geographic mix.

Hours from its top 100 original titles fell in the period, while its U.S. TV share slipped below 8%. “NFLX has lacked big original series & it’s showing,” he wrote.