Wall Street becoming wary of Netflix’s stock as lack of hit shows spark concern
Netflix’s bullish support on Wall Street is starting to crack, with the stock on pace for its worst year since 2022 amid rising concerns about growth. HSBC cut its rating on the streaming giant to hold last week, citing signs of weakening subscriber engagement. That followed a downgrade from Wells Fargo earlier this month that called out a lack of hit shows and gave Netflix its first sell-equivalent rating in months. An August rebound in the stock has been snuffed out, leaving Netflix down 26 per cent on the year and among the 50 worst performers in the S&P 500 Index in 2026. Of the 65 analysts covering the shares, 48 now have buy ratings, the fewest since March, according to data compiled by Bloomberg. “Netflix has become a show-me story because it is missing the mark on having real blockbuster, top-100-type shows, which is something that needs to be fixed lickety-split,” said Eric Clark, chief investment officer at Accuvest Global Advisors, which owns the stock but has been reducing its position. “In order to fix the engagement issue, you have to give people stuff worth talking about, and it’s starting to seem like there’s a creativity problem, because Netflix arguably has the most money to spend, but it’s the other streamers getting the hot shows,” Clark said. Netflix has more subscribers than any other paid streaming service, but keeping viewers glued to their screens is increasingly important, especially as the company builds out its advertising business amid increased competition. Delivering a steady stream of hits is crucial to engagement, which is why the perception that Netflix has lacked breakout titles this year has weighed so heavily on shares. The stock is now down 48 per cent from a peak in June 2025. Even well-received Netflix shows have struggled to maintain their audiences past their first seasons, Bloomberg News reported in July. The company’s attempt to buy Warner Bros Discovery, which it abandoned earlier this year, was seen by some investors as a lack of confidence in its ability to grow organically. A Netflix spokesperson declined to comment. Ads coming to Netflix in Ireland next March, company confirms The dearth of Netflix blockbusters stands in contrast with smaller streaming services like Apple ’s, which dominated this year’s Emmy Awards, or to the resurgence of theatrical moviegoing, fuelled by big hits such as Obsession, Spider-Man: Brand New Day and The Odyssey. Cinema companies such as AMC Entertainment Holdings, Cinemark Holdings and IMAX have seen their shares rally more than 50 per cent this year, far outperforming the S&P 500 and Nasdaq 100’s gains of 12 per cent and 20 per cent, respectively. However, Netflix’s biggest rival for viewers is Alphabet’s YouTube , whose share of the US TV market reached an all-time high of 14.2 per cent in July, according to Bloomberg Intelligence, which used the most recent monthly data from Nielsen. Netflix’s share dropped below 8 per cent. YouTube’s gains are “increasingly coming at the direct expense of Netflix,” HSBC analyst Mohammed Khallouf wrote in his September 22nd downgrade. He blamed the trend on “a declining reception to NFLX’s original content,” adding that a “near-term recovery in engagement looks unlikely”. Of course, Netflix has a long track record of popular titles and some of its biggest hits seemed to come out of nowhere, such as KPop Demon Hunters, Adolescence and Squid Game. It also has some high-profile releases on the horizon. The Further Mis-Adventures of Cliff Booth, a sequel to Once Upon a Time ... in Hollywood, starring Brad Pitt, will be available to subscribers in December. The next read on Netflix’s financial performance will come on October 20th when the Los Gatos, California-based company reports third-quarter earnings. Wall Street is anticipating revenue growth of nearly 12 per cent, which would be the slowest expansion since 2023, according to data compiled by Bloomberg. Net income is expected to rise 36 per cent, up from growth of 8 per cent a year ago. Even with Netflix’s expansion expected to slow, many investors remain positive on the stock’s long-term potential. Part of the reason is its beaten-down valuation. At roughly 19 times estimated earnings, Netflix shares are trading at a more than 60 per cent discount to their 10-year average of almost 50 times. “I don’t think the concerns about competition are overdone, since everyone is fighting for the next bit of market share, but Netflix has a proven record of finding hits and moving into new growth areas like sports, podcasts and gaming,” said Gerald Sparrow, chief investment officer of the Sparrow Growth Fund, which owns the stock. “The growth and valuation continue to look attractive, and the management team has been able to get out from overhangs like this in the past. It may not be this quarter, but I think in a year, we’ll look back on these prices as an opportunity.” – Bloomberg