TLDR
- Netflix (NFLX) dropped 22.66% over three months as expense guidance concerns overshadowed Q4 earnings that beat estimates with revenue at $12.05 billion.
- Advertising revenue exceeded $1.5 billion in 2025, more than 2.5x prior year, with Wedbush projecting it will double to $3 billion in 2026.
- Phillip Securities upgraded the stock from “Sell” to “Accumulate” at $100 target, while Wedbush holds “Outperform” with $115 target.
- Analysts assign “Moderate Buy” consensus with average target of $115.43, representing 34% potential upside from current levels.
- Company guides 2026 revenue to $50.7-$51.7 billion with projected EPS growth of 23.72% to $3.13 per share.
Netflix shares have taken a hit lately. The stock fell 22.66% in three months despite beating Q4 earnings expectations. Pre-market trading showed continued weakness even after solid results.
The pressure stems from expense concerns. Management projects faster spending growth this year compared to 2025. Investors worry about what that means for profit margins.
Some Wall Street firms see opportunity in the decline. Wedbush Securities argues the selloff reflects unrealistic expectations rather than weak business performance. The firm believes Netflix has become a victim of its own success, with investors expecting perfection every quarter.
Q4 results showed healthy growth. Revenue increased 17.6% to $12.05 billion, topping the $11.97 billion forecast. Operating income rose 30.1% to roughly $3 billion. Net income grew 29.4% to $2.4 billion. EPS jumped 30.2% to $0.56, beating the $0.55 estimate.
The Advertising Story
Netflix brought in over $1.5 billion in ad revenue during 2025. That number more than doubled from the previous year.
Wedbush predicts this will reach at least $3 billion in 2026. Growth should continue through 2027 and beyond. The Warner Bros. Discovery deal, if completed, could accelerate expansion further.
Netflix management confirmed expectations for advertising revenue to double from 2025 levels. The ad-supported tier is becoming a major revenue stream for the platform.
The company posted $1.9 billion in free cash flow during Q4, up 35.8% from last year. Viewers watched 96 billion hours of content in the second half of 2025, marking a 2% year-over-year increase.
Analyst Actions and Targets
Phillip Securities made a notable move, upgrading Netflix from “Sell” to “Accumulate.” They set a $100 price target. The firm cited clear streaming leadership and strong pricing power as key factors.
Phillip Securities acknowledged potential bumps related to the Warner Bros. deal. However, they believe Netflix’s financial structure positions it well for long-term success.
Wedbush keeps its “Outperform” rating with a $115 target. The firm maintains that current weakness represents a buying opportunity driven by excessive expectations rather than fundamental problems.
Market Consensus
Wall Street shows cautious optimism. The stock carries a “Moderate Buy” rating overall. Out of 44 analysts, 25 recommend “Strong Buy,” three suggest “Moderate Buy,” 14 advise “Hold,” and two maintain “Strong Sell.”
The average price target sits at $115.43, implying 34% upside potential. The highest target of $150 points to possible gains of 74.2%.
Netflix currently trades at 26.62 times forward earnings. While that’s above some competitors, it sits below the company’s five-year historical average. This suggests potential value for long-term investors.
The streaming leader serves around 325 million paid subscribers worldwide. Its market cap hovers near $364.9 billion, maintaining its position as the industry’s dominant player.
Looking ahead, Netflix forecasts 2026 revenue between $50.7 billion and $51.7 billion, implying 12-14% growth. Analysts project Q1 fiscal 2026 EPS will reach $0.76, up 15.2% year-over-year. Full-year fiscal 2026 earnings should grow 23.72% to $3.13 per share. Fiscal 2027 EPS is estimated at $3.77, representing 20.45% growth.
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