Wells Fargo’s ‘Rare’ Downgrade Brings Fresh Pressure to Netflix Shares

Shares of Netflix (NFLX) are under renewed pressure Friday morning, stemming from a rare downgrade to Underweight from Equal Weight from Wells Fargo with a price target of $57, down from $80.

In Wells’ view, Netflix’s originals content slate is weaker in the second half of 2026 compared to prior periods and it cites engagement risk for the downgrade. The firm also cut its 2027 and 2028 EPS estimates to $3.77 and $4.52, respectively, and that compares to the current consensus EPS figures of $3.58 for this year, $3.82 for next year, and $4.54 in 2028.

5 Observations on the Wells Fargo Call

First, and foremost, Netflix’s content slate for H2 2026 is not new, and it is understood that it laps the final season of Stranger Things. Given the global phenomenon that program has been, it would be silly not to expect lower engagement rates in H2 2026 compared to H2 2025.

Second, the EPS cuts made by Wells are not overly dramatic for 2027 and 2028 relative to consensus forecasts.

Third, this means the price target call hinges on multiple compression, and heading into today, NFLX shares were trading at ~20x expected 2027 EPS. When we look at NFLX’s 2027 EPS growth compared to the market consensus of $3.58 for this year, that is slower growth compared to the S&P 500 and that is part of the reason why our NFLX price target sits at $85, not the $95 market consensus or higher like those at Needham ($120), Bank of America ($105), and Evercore ISI’s new $110 target from earlier this week.

In contrast to the engagement concern raised by Wells, Evercore raised its target following survey findings that in the U.S. and Japan are demonstrating multi-year highs in penetration rates.

Fourth, following its price increases earlier this year in the U.S., Netflix lifted its price in the U.K. this month for the 18 million subscribers it has in that market. If Wells cited this as a concern, we would agree but also point out that the hike should also foster the move to higher-margin advertising-supported subscriptions.

Fifth, Wells cited share loss to YouTube but July 2026 data published in Nielsen’s most recent Gauge report published this month puts Netflix’s share hovering around 8%, on par with where it was in May and June. What Nielsen’s findings show is that Disney (DIS) and Paramount (PARA) have lost streaming share against YouTube.

Putting It All Together

We’ve seen calls like this before with other stocks. It is the flip slide of slapping a sky-high price target on a stock, a move that usually leads to attention. Indeed we are seeing that Friday, with the decline in NFLX shares.

However, the weekly chart for NFLX has the shares battling the 200-day moving average near $73. If the shares hold that support level following Friday’s downgrade that strongly suggests to us that a bottom could be forming.

We acknowledge that a positive test of support can take a day or three to emerge, and that Friday is also a triple-witching event, so it’s possible the shares close the mid-July gap we see in the daily chart. That and delivering a positive test of that weekly 200-day moving average would imply a firmer support.

The logical question is what is a catalyst that could get NFLX shares moving again? The most likely answer is earnings that show the impact of the company’s recent price increases and the growing influence of its advertising effort on its business model. Another would be management discussing its 2027 content slate, which we know includes tentpole series Wednesday.

Putting it together, if NFLX delivers the positive test discussed above, we would consider picking up additional shares to help improve the position’s cost basis in the Pro Portfolio. But we would weight that against potential moves with other holdings that, as it stands now, have greater upside prospects.

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At the time of publication, TheStreet Pro Portfolio was long NFLX shares.