Netflix investors have had little to celebrate in recent weeks.
Shares of the streaming giant fell 14% in September, according to S&P Global Market Intelligence, extending a broader decline that has taken the stock down about 18% over the past month and 25% this year.
The stock is now heading for a fifth consecutive week of losses as investors grapple with slowing engagement, a softer content slate and intensifying competition for consumers’ attention.
The concerns received an unusual boost from Netflix itself on Thursday, when co-CEO Ted Sarandos acknowledged that the company’s growth has not been fast enough.
“Overall, we’re not growing as fast as I want us to,” Sarandos said at Bloomberg’s 2026 Screentime event in Los Angeles.
“We are, though, also doing things that create a lot of headwind to that number,” he added.
Netflix’s viewership increased only 2% during the first half of 2026, according to Sarandos.
The comments come at a difficult time for the stock, with investors increasingly demanding evidence that Netflix can maintain growth while continuing to invest heavily in programming.
Live programming offers a potential growth lever
Sarandos pointed to live programming as one area where Netflix could potentially accelerate growth.
The company, however, has yet to generate viewing returns from live content that match its spending.
Netflix allocates about 5% of its roughly $20 billion annual content budget to live programming, while live shows account for only about 1% of viewing.
The strategy nevertheless gives Netflix another avenue to attract audiences beyond its traditional scripted and unscripted programming.
The company is also expanding into gaming, documentaries, sports and shorter-form content as it seeks to increase engagement across its platform.
Those initiatives are being closely watched because the core streaming business is becoming increasingly mature in some of Netflix’s biggest markets.
Wells Fargo warns of weaker engagement
A series of analyst downgrades has compounded the pressure on Netflix shares.
Earlier this month, Wells Fargo downgraded Netflix to Underweight from Equal Weight and reduced its price target to $57 from $80.
The new target represented about 16% downside from Netflix’s Thursday closing price.
Analyst Steven Cahall and his team said Netflix viewership fell 8% year over year during the first half of 2026, while hours viewed for its Top 100 Originals declined 3%.
The analysts expect a more than 20% year-over-year decline in viewership for Netflix’s Top 100 Originals during the second half.
Wells Fargo said Netflix appeared to be broadening engagement by taking content more directly to YouTube while also investing in gaming, documentaries and sports.
But the brokerage warned about a shift in Netflix’s content mix and the possibility of “missing the water cooler originals.”
The firm also expects Netflix’s second-half content slate to pressure margins, forecasting operating margins of 32.6% in 2027 and 34.2% in 2028, below its previous expectations.
Wells Fargo said Netflix could face a “content spend reboot” and described the potential outcome as a “messier NFLX story.”
YouTube becomes a bigger competitive threat
HSBC also downgraded Netflix later in September, cutting its rating to Hold from Buy and lowering its price target to $76 from $96.
The brokerage cited increasing competition from Alphabet’s YouTube and concerns about near-term viewer engagement.
YouTube’s growing presence on television screens is particularly important because Netflix is competing not simply against other streaming services, but against virtually every form of entertainment competing for time in the living room.
According to HSBC, YouTube captured a record 14.2% share of US television viewing in July, while Netflix’s share fell to 7.8%, its lowest level in several years.
HSBC believes YouTube’s momentum is increasingly coming at Netflix’s expense as the Google-owned platform expands its presence on television.
The shift also highlights the changing nature of Netflix’s competitive landscape.
YouTube combines long-form videos, short-form content, creator programming and an enormous advertising ecosystem, giving it multiple ways to attract and retain viewers.
Bulls point to international growth
Not all analysts believe Netflix’s recent decline represents a deterioration in its long-term story.
Evercore ISI raised its price target to $110 from $100 and reiterated its Outperform rating, citing improving subscriber trends in the US and Japan along with opportunities in live events, short-form content and advertising.
Evercore analyst Kutgun Maral said Netflix’s penetration rate reached a multi-year high of 63% in the US.
In Japan, penetration reached a record 22%, according to the brokerage’s surveys.
Churn intentions also improved in both markets, although customer satisfaction remained a concern in the US.
The findings came from Evercore ISI’s 58th quarterly US subscriber survey and its semi-annual Japan survey.
The brokerage said the results reinforced its view that Netflix continues to have meaningful subscriber engagement and pricing power.
Deutsche Bank has also turned more positive on the stock, upgrading Netflix to Buy from Hold, although it lowered its price target to $95 from $100.
The firm reduced its operating income and free cash flow estimates after Netflix’s second-quarter results but argued that investors may be focusing too heavily on US viewing trends while overlooking the company’s international opportunity.
Analyst Bryan Kraft noted that international engagement has increased year over year in each of the past four six-month periods.
Kraft believes Netflix’s global scale, brand and production capabilities could support a broader “Netflix As A Platform” opportunity over time.
Valuation has become less demanding
The sharp decline has also changed Netflix’s valuation.
The stock now trades at around 18 times Kraft’s forecast 2027 earnings, substantially below the roughly 40 times forward earnings multiple it commanded in June 2025.
That decline means the stock no longer reflects the same expectations for rapid growth that investors had previously priced in.
The lower valuation provides more room for upside if international growth remains healthy and Netflix can stabilize engagement.
Artificial intelligence could also become part of the longer-term bull case.
Kraft argues that AI could help Netflix create content more efficiently, personalize recommendations and improve advertising capabilities.
For Netflix, that could mean using AI not merely to reduce costs but also to create additional monetization opportunities from its enormous international audience.
However, the potential benefits remain longer-term possibilities rather than immediate solutions to the company’s engagement problem.
October 20 earnings will be crucial
Netflix is scheduled to report third-quarter earnings on October 20, but the results themselves may not be enough to reverse the stock’s decline.
Wall Street expects diluted earnings per share of $0.82, up 39% from $0.59 in the year-ago quarter.
Netflix has beaten Wall Street’s EPS estimates in two of its past four quarters and missed in the other two.
More importantly, the market has recently shown little interest in earnings beats alone.
Netflix exceeded EPS expectations in each of its last three reported quarters, yet shares declined after every release.
The most recent report was followed by a 6.42% drop despite a modest earnings beat.
That pattern suggests investors are placing greater weight on forward guidance than on the quarter that has already ended.
Netflix’s own third-quarter forecast calls for revenue of about $12.9 billion, representing 12% year-over-year growth, and an operating margin of 33.2%, compared with 28.2% a year earlier.
The margin comparison, however, requires some context.
Netflix’s year-ago quarter included a Brazilian tax charge that reduced operating margin by more than five percentage points.
Excluding that charge, the projected margin would be roughly flat with the underlying margin a year ago, or slightly lower.
The bigger question may therefore be what Netflix says about the fourth quarter.
If the company meets its third-quarter target, its narrowed full-year guidance could allow fourth-quarter revenue growth to fall as low as about 11%.
A forecast toward that lower end could raise fresh concerns that growth is slowing faster than expected.
Is Netflix stock cheap enough ahead of earnings?
At around $70, Netflix trades at roughly 18 times earnings based on the average analyst estimate for 2027 profits.
The valuation no longer assumes a return to the 18% growth rate Netflix delivered in late 2025.
But it still appears to assume that growth can settle around 12% while profits continue to rise.
That makes the fourth-quarter outlook particularly important.
“In the end, four straight post-earnings drops have taken a lot of optimism out of Netflix’s valuation. Still, the pattern has held all year. What the company says about the next quarter has counted more than what it just reported, and I’d want to see that fourth-quarter forecast before buying shares,” Daniel Sparks of The Motley Fool writes.
Wall Street remains broadly positive despite the recent selloff.
According to The Wall Street Journal, 32 analysts have a Buy rating on Netflix, while seven have a Hold rating and one has a Sell rating.
The split in the outlook reflects the central question surrounding Netflix today: whether the recent weakness is a temporary slowdown in an otherwise strong global streaming business, or evidence that the company is entering a more difficult phase in which maintaining engagement and double-digit growth becomes increasingly challenging.
For now, the stock’s valuation is considerably lower than it was during its 2025 peak, but the company’s own admission that growth is slower than desired means investors may need more than another earnings beat to regain confidence.
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