Wells Fargo Takes NFLX Price Target from $80->$57!
Taking a price target from $80 -> $57 for an industry leader like $NFLX is a no joke downgrade! Downgrades like this intrigue me, as they're rare for quality companies & 'potentially' create opportunities. Sounds like analyst's primary concerns are 'softening user engagement & content slate risks'. Full disclosure: Bullet points below taken from Gemini's overview on the downgrade. - Weakening Overall Engagement: Wells Fargo estimates average viewing fell to ~1.6 hours per subscriber per day in the first half of the year—down roughly 8% compared to adjusted 2023 levels. Overall viewing hours on Netflix dipped 8% year-over-year. - Declining Impact from Originals: Viewing hours for the top 100 original series fell 3% in H1 and are projected to drop 21% year-over-year in H2. Cahall argues Netflix suffers from a "hit problem"—expanding into reality TV, documentaries, live sports, and gaming without generating enough mega-hits. - Content Distribution Dilution: Broader distribution onto third-party platforms like YouTube expands reach but dilutes the exclusivity of blockbuster original programming. - Margin & Earnings Pressure: Second-half content investments and a shifting schedule are expected to weigh on profitability. Wells Fargo lowered its 2027 and 2028 EPS estimates to $3.77 and $4.52 (below consensus), projecting operating margins of 32.6% in 2027 and 34.2% in 2028. Where does this leave me? My fair value continues to be ~$70, so today's $71.xx definitely doesn't provide the margin of safety I'd need to start buying shares. Strangely enough, Wells Fargo's new price target fairly close to the margin of safety I'm looking for, assuming of course nothing changes between now & then (if it ever get there).
320 views
6 Comments
Satwinder Singh@thevalueinvestor · 1dEdited
Scott I took a 1/3 position in Netflix earlier this year and I’m currently down about 22%. I’ve thought about getting back into the stock a few times but always ended up opting out. With this latest downgrade, I think today’s move is more of an overreaction by the market. I’m going to give it a couple of days to settle and see if the price can get down to around $65. If it does, I might add another 1/3 position and see how it plays out. The stock is definitely getting bogged down by some of the weaker earnings and metrics you mentioned.
See the full comment section 👀Sign up for the full Blossom experience!
