Phillip Capital: Declining user engagement and overvaluation of Netflix (NFLX.US) users, downgraded the rating to “sell”

The Zhitong Finance App learned that Phillip Capital downgraded the NFLX.US (NFLX.US) rating from the previous “neutral” to “sell” and maintain the target price of 950 dollars. According to Helena Wang's team of analysts, this rating adjustment was due to the recent rise in stock prices. Given the stock's “overvalued” and declining audience engagement (which could reduce ad revenue, making it difficult to achieve the goal of doubling ad revenue by 2025), they remain wary of it.

Phillip Capital still believes that Netflix is very resilient, less affected by tariffs, and that profit growth is strong. The research agency said, “Netflix remains a leader in video-on-demand services, thanks to its significant pricing advantages and continuously improving profit margins. Netflix's diverse content library is paying off and will continue to pay off.”

However, they believe that the growth rate of the number of new members is likely to accelerate significantly, based on revenue growth in the first half of 2025 (14% year-on-year increase), but this has also led to a decline in average spending per viewer.

The research agency said, “Reduced user engagement means each user gets fewer ad impressions, which directly leads to a decline in ad revenue. However, part of this may be due to Netflix's restrictions on account sharing, causing occasional or infrequent viewers to use separate accounts, which have lower user engagement levels.”