Oppenheimer and KeyBanc cut their price targets on Netflix (NFLX) stocks ahead of the company's second-quarter earnings later this week, with Oppenheimer lowering its target to $100 from $120 and KeyBanc reducing its target to $92 from $115. The reductions follow similar cuts from Citi and Bernstein last week, both of which lowered their targets to $100. Analysts stated the cuts reflect valuation concerns, with Netflix trading at a premium to industry peers despite slowing revenue growth. All four firms maintained Buy-equivalent ratings on the stock. Netflix shares edged 0.6% higher in pre-market trade on Monday, while retail sentiment on Stocktwits remained in bullish territory over the past week.
Analysts Cite Valuation Concerns for Netflix Stock Target Cuts
The analysts broadly stated that Netflix's valuation has become stretched relative to its near-term fundamentals. Citi analyst Jason Bazinet outlined four factors that may be weighing on market sentiment: softer viewership trends, uncertainty surrounding potential mergers and acquisitions, a lack of fresh near-term catalysts, and investor capital rotating toward semiconductor stocks. Despite the lower price targets, all four firms maintained Buy-equivalent ratings, citing valuation concerns rather than a weakening long-term outlook.
Netflix Abandoned Warner Bros. Discovery Merger Pursuit
The price target cuts trace to Netflix's abandoned pursuit of Warner Bros. Discovery. The two companies had reportedly discussed an all-cash transaction, a deal that drew scrutiny given Netflix's roughly 20% share of the global streaming market. Had the merger gone through, a combined entity would likely have crossed the 30% threshold that regulators typically treat as a presumption of illegality under merger guidelines. Netflix has since walked away, and the stock reportedly ticked up on that news. Longtime founder and chairman Reed Hastings' resignation has also weighed on sentiment this year.
Wall Street Forecasts $12.58 Billion Revenue for Netflix Q2
Consensus estimates call for second-quarter revenue of roughly $12.58 billion, up about 13.5% to 13.8% year over year, Netflix's slowest growth pace in over a year. Wall Street is also looking for earnings per share of $0.79. Management has guided to an operating margin of 32.6% for the quarter. Analysts will be watching closely to see whether advertising revenue is on track to meet Netflix's roughly $3 billion full-year target and whether Q1's disappointing print, which missed EPS estimates by nearly 8%, was a one-off. They will be watching for engagement trends after Netflix stopped reporting regular subscriber counts after the first quarter. NFLX stock has fallen over 20% this year and over 40% in the last 12 months.
FAQ
What did Oppenheimer and KeyBanc do to their Netflix price targets?
Oppenheimer lowered its price target on Netflix to $100 from $120, while KeyBanc reduced its target to $92 from $115 ahead of the company's second-quarter earnings later this week.
Why did analysts cut their Netflix stock price targets?
Analysts stated the cuts reflect valuation concerns, with Netflix trading at a premium to industry peers despite slowing revenue growth. Citi analyst Jason Bazinet outlined four factors: softer viewership trends, uncertainty surrounding potential mergers and acquisitions, a lack of fresh near-term catalysts, and investor capital rotating toward semiconductor stocks.
What are Wall Street's revenue and earnings forecasts for Netflix Q2?
Consensus estimates call for second-quarter revenue of roughly $12.58 billion, up about 13.5% to 13.8% year over year, and earnings per share of $0.79. Management has guided to an operating margin of 32.6% for the quarter.
