Netflix Price Target Cuts Grow Ahead Of Q2 Earnings – What's Driving Wall Street's Caution On NFLX Stock?

• The latest target cuts follow similar revisions from Citi and Bernstein, although all four firms maintained Buy-equivalent ratings.
• Analysts said the reductions reflect valuation concerns, with Netflix trading at a premium to industry peers despite slowing revenue growth.
• Consensus forecasts call for approximately $12.58 billion in revenue and earnings per share of $0.79 for the quarter.

Shares of Netflix (NFLX) edged higher in pre-market trade on Monday, even after two more Wall Street firms cut their price targets on the stock ahead of the company’s second-quarter earnings later this week.

Oppenheimer lowered its price target on Netflix to $100 from $120, while KeyBanc analyst Justin Patterson reduced his target to $92 from $115, according to research notes cited by TheFly. The revisions follow similar cuts from Citi analyst Jason Bazinet and Bernstein last week, both of which lowered their targets to $100.

NFLX’s stock edged 0.6% higher in pre-market trade, and retail sentiment on Stocktwits around the streaming giant remained in ‘bullish’ territory over the past week, while chatter rose to ‘normal’ from ‘low’ levels. 

Despite the lower price targets, all four firms maintained ‘Buy’-equivalent ratings, citing valuation concerns rather than a weakening long-term outlook.

Why Analysts Are Cutting Netflix Price Targets

The analysts broadly stated that Netflix's valuation has become stretched relative to its near-term fundamentals. 

Citi's Bazinet outlined four factors that may be weighing on market sentiment, which included softer viewership trends, uncertainty surrounding potential mergers and acquisitions, a lack of fresh near-term catalysts, and investor capital rotating toward semiconductor stocks.

The Warner Bros. Discovery Deal Still Lingers

That overhang traces 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, but the entire episode left analysts questioning what inorganic growth options remain on the table. Compounding the uncertainty, longtime founder and chairman Reed Hastings' resignation has also weighed on sentiment this year.

What Wall Street Will Watch In Q2 Earnings

Consensus estimates call for second-quarter (Q2) 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 (EPS) of $0.79, according to Koyfin data.

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 (Q1).

NFLX stock has fallen over 20% this year and over 40% in the last 12 months. 

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