Investors have become accustomed to the company’s routine outperformance, which has propelled its shares to gains of more than 360% over the past three years, far outpacing media giants like Walt Disney and even tech giants Apple and Alphabet.
It has gained additional attention due to the overwhelming success of the animated film “KPop Demon Hunters”.
But since its peak in June, shares have fallen more than 16%, indicating investors are becoming more cautious about the high valuation and lack of details on subscriber growth. The company’s price-to-earnings ratio is almost 40, much higher than that of other media companies and big tech names.
“The shares have had a strong run this year, so expectations were already high. With the valuation now above its long-term average, there is added pressure to not only deliver, but to outperform,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Netflix expects fourth-quarter revenue of $11.96 billion, compared to Wall Street’s projection of $11.9 billion. Third-quarter revenue was roughly in line with expectations at $11.5 billion, according to LSEG data. The company has ventured into advertising and video games to diversify its revenue streams, but these businesses have struggled amid shifts in leadership and strategy, along with the competition. For the third quarter, Netflix said it posted its best ad sales quarter in history without disclosing a figure.
“Netflix must quickly demonstrate that its advertising program can accelerate growth to justify a sky-high multiple,” said Wedbush analysts, who called the company’s latest guidance “disappointing” after several quarters of standout results.
Netflix stopped reporting subscriber figures in early 2025. The company is counting on its major releases through the end of the year, including “Stranger Things” and two NFL games to be streamed live on Christmas Day.
However, analysts at Evercore ISI suggested that investors should buy any dip in the stock, noting that competitors Disney+ and HBO Max have increased their subscription prices, giving Netflix enough cover to raise its own rates. The Connecticut-based company missed third-quarter profit estimates due to a $619 million charge related to a tax dispute in Brazil. JP Morgan analysts described the costs as “noise” and noted that “the larger focus is on the lack of upside in the second half of the year.”
“In the absence of subscriber numbers, some proponents are grasping at straws to find any sign of weakness as the company is faring much stronger than its rivals,” said PP Foresight analyst Paolo Pescatore.
At least three brokers lowered their price targets on Netflix after the results.
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