Netflix stock rating cut to Neutral by JPMorgan

On Monday, JPMorgan analysts downgraded Netflix (NASDAQ:NFLX) stock from Overweight to Neutral, although they increased the price target to $1,220 from $1,150. The adjustment follows a period of significant stock price appreciation for Netflix, which has led analysts to reassess the risk/reward balance for the company’s shares. The streaming giant, now commanding a market capitalization of over $507 billion, has seen its stock surge nearly 92% over the past year, with InvestingPro data showing the stock trading near its 52-week high of $1,196.50.

According to JPMorgan, the reevaluation comes despite no change in their long-term positive outlook on Netflix’s role as a leader in streaming and its potential to evolve into a global television platform. However, they pointed out that Netflix’s shares are trading at an all-time high, with valuations of 39 times the estimated 2026 GAAP earnings per share and 44 times the estimated 2026 free cash flow, suggesting that the market may have already priced in the anticipated upside to the company’s 2025 guidance. InvestingPro analysis reveals a current P/E ratio of 55.17 and shows the stock trading at elevated EBITDA and revenue multiples. For deeper insights into Netflix’s valuation metrics and over 20 additional ProTips, consider exploring InvestingPro’s comprehensive research report.

The analysts also noted that while Netflix has been a defensive stock, there may be a shift in investor interest to other sectors if tariff and macroeconomic concerns continue to diminish. They anticipate that investors might rotate into other internet stocks and market areas that have been more affected and pressured recently. Despite these concerns, Netflix maintains strong fundamentals with a perfect Piotroski Score of 9 and healthy financials, including a current ratio of 1.2 and sufficient cash flows to cover interest payments.

Additionally, JPMorgan highlighted seasonal trends, indicating that the summer months typically bring slower activity for Netflix. Following the previous week’s Upfronts—an event where networks preview their upcoming content—analysts expect a quieter near-term catalyst path for Netflix, despite the promise of compelling content in the third quarter.

The revised price target of $1,220, up from $1,150, reflects a modest increase in the firm’s valuation of Netflix shares, but the downgrade to Neutral underscores a cautious stance on the stock’s near-term prospects. This reassessment by JPMorgan suggests a more balanced view of Netflix’s investment potential, acknowledging both the company’s strong market position and the current high valuation of its shares.

In other recent news, Netflix’s financial performance and strategic initiatives have been under the spotlight. BMO Capital Markets reaffirmed its Outperform rating on Netflix, maintaining a price target of $1,200.00, citing the company’s strong user engagement and the anticipated global rollout of an enhanced TV experience. The firm emphasized the potential for increased ad revenue with new AI-powered features and improvements in user interface design. Meanwhile, Loop Capital maintained a Hold rating on Netflix with a $1,000 price target, highlighting the company’s content strategy and expanding dominance over traditional media.

Evercore ISI also kept an Outperform rating with a $1,150 price target, drawing attention to Netflix’s advertising technology advancements and content lineup. The firm expressed optimism about the company’s growth in ad viewership and its strategic plans. Similarly, JPMorgan reiterated an Overweight rating with a $1,150 price target, noting Netflix’s robust subscription model and international expansion of its Ads Suite. The firm projected significant growth in advertising revenue, anticipating it to more than double by 2025.

Netflix’s recent disclosures, including reaching 94 million Monthly Active Users for its ad-supported tier, were highlighted by BMO Capital as a positive sign for future monetization. The company’s strategy to integrate shows, movies, and games was also noted as a long-term growth opportunity. These developments reflect a continued focus on diversifying revenue streams and enhancing the platform’s competitive position in the streaming market.

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