TLDR
- Wells Fargo downgraded Netflix from Equal Weight to Underweight, cutting its price target from $80 to $57
- NFLX fell 2.1% in pre-market and was down 1.4% during Thursday’s session, trading at $75.31
- The downgrade marked the first sell-side Underweight rating among analysts covering the stock
- Concerns center on weakening engagement trends and the cost of live sports rights
- The consensus analyst rating remains “Moderate Buy” with an average price target of $96.53
Wells Fargo issued a rare bearish call on Netflix, downgrading the stock from Equal Weight to Underweight and slashing its price target from $80 to $57. That sent NFLX down 2.1% in pre-market trading on September 18, before settling to a 1.4% loss during Thursday’s session at $75.31.
The stock traded as low as $75.30, with volume coming in at around 27.7 million, roughly 35% below its average daily volume of 42.6 million.
Before Wells Fargo’s move, Netflix carried 35 buy ratings and 16 hold ratings, with zero sell recommendations. Adding the first Underweight to that list is a real shift in how Wall Street is looking at the name.
The bank’s concern isn’t new, but it’s now on the record. Weakening engagement trends and the rising cost of chasing live sports rights were the core issues flagged.
Netflix has been pushing hard into live events and sports to hold onto viewers, but investors aren’t convinced the economics work. Sports rights are expensive, and the returns aren’t clear yet.
The stock is already under pressure heading into this session. It’s sitting well below its 52-week high of $124.86, though it remains above its 52-week low of $65.08. The 200-day moving average sits at $84.36, and NFLX is trading below that too.
The broader market isn’t to blame. The Nasdaq, S&P 500, and Dow Jones were all trading in positive territory on Thursday, making Netflix a clear laggard.
What Analysts Are Saying
The wider analyst community hasn’t followed Wells Fargo’s lead yet. The consensus rating remains “Moderate Buy” with an average price target of $96.53, well above where the stock is currently trading.
Wolfe Research reaffirmed an Outperform rating with a $95 target in late August. Evercore also held its Outperform rating, bumping its target to $110. Deutsche Bank has a $110 target on the stock.
TD Cowen cut its target from $112 to $100 in July but kept a Buy rating. Itau BBA reduced its target from $151.40 to $96 and maintained Outperform.
A Few Bright Spots
Bill Ackman’s Pershing Square reportedly rebuilt its Netflix position in Q2, which signals some confidence from at least one high-profile investor.
Analysts have also pointed to Netflix’s growing advertising business and active share repurchase program as potential value drivers going forward.
On the earnings front, Netflix posted $0.80 EPS in its July quarter, just ahead of the $0.79 consensus estimate. Revenue came in at $12.56 billion, slightly below the $12.58 billion expectation, but still up 13.4% year over year.
Inside the Company
CEO Ted Sarandos sold 27,312 shares on August 4 at an average price of $73.35, for a total of just over $2 million. The sale was made under a pre-arranged 10b5-1 plan to cover tax obligations related to equity vesting.
Insiders overall sold 179,045 shares in the last 90 days, valued at approximately $13.1 million. Institutional investors hold 80.93% of the stock.
The full year EPS consensus from analysts currently stands at $3.59.
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