Wells Fargo cuts Netflix rating on engagement risk, weak slate

Wells Fargo has downgraded streaming leader Netflix (NFLX) to Underweight from Equal Weight, warning that softening viewer engagement and a weaker content slate could negatively impact margins and company valuation. Analyst Steven Cahall slashed the price target to $57, implying approximately 25% downside, while reducing the stock's valuation multiple to 15 times forward earnings from 21 times. The brokerage pointed to worrying engagement trends, noting that subscriber viewing averaged 1.6 hours per day in the first half of the year—an estimated 8% drop from 2023 levels after adjusting for geographic mix and password-sharing crackdowns. Furthermore, viewing hours for Netflix's top 100 original titles dropped, pushing its share of U.S. television viewing below 8%. Wells Fargo projects second-half hours from top 100 originals to decline 21% year-over-year, which could elevate churn risks into 2027. Consequently, the bank lowered its 2027 and 2028 earnings per share forecasts to $3.77 and $4.52, identifying the upcoming January viewership release as a key negative catalyst.