Netflix (NFLX.US)'s stock price fell to a 52-week low after lowering its full-year revenue guidance, some Wall Street analysts are optimistic and others are worried

The Zhitong Finance App learned that after streaming giant Netflix (NFLX.US) announced its third-quarter earnings report, Wall Street analysts clearly disagreed on its growth prospects. Although the company's revenue and profitability continued to improve, the revenue growth rate slowed to its lowest level in three years. Coupled with the advertising business falling short of expectations and the reduction in revenue guidelines for the whole year, investors are concerned about its growth momentum. Netflix's stock price fell more than 4% at the beginning of the Tuesday session, hitting a 52-week low.

According to financial reports, Netflix's third-quarter revenue reached 12.87 billion US dollars, up 12% year over year, in line with the company's previous guidelines. Operating margin increased to 34.6% from 28.2% in the same period last year, and earnings per share reached $0.89, up 49% year over year.

Despite solid overall profit performance, the focus of the market turned to the slowing growth of the advertising business and the fourth quarter results outlook. Netflix currently expects advertising revenue of about 2.7 billion US dollars for the full year of 2026, which is lower than the previous target of about 3 billion US dollars, which is equivalent to a reduction of about 300 million US dollars. Ad revenue growth is also expected to drop to 80% from 100% previously.

Management explained that ad revenue did not meet expectations mainly due to delays in the launch of some advertising product features and slower than planned system integration with some advertisers, rather than a marked deterioration in advertising demand itself.

However, as Netflix continues to regard the advertising business as an important growth engine in recent years, related business development falls short of expectations, causing market concerns.

Needham analyst Laura Martin downgraded Netflix's rating to “hold” after the earnings report was announced. She warned that as competition in the streaming media industry becomes more intense, Netflix may face the risk of pressure on profit margins and a further slowdown in revenue growth.

Unlike Needham's cautious attitude, Deutsche Bank believes that Netflix's current earnings report did not release many new negative signals, and that delays in advancing the advertising business were the main problem.

Deutsche Bank analyst Bryan Kraft said that overall management comments on user churn rates, international market viewing conditions, content production team adjustments, and long-term growth prospects are encouraging. He believes that although it is reasonable for the company to lower performance guidelines and put pressure on stock prices, the market reaction is still too intense. What is particularly noteworthy is that Netflix's subscription business revenue is actually higher than the original plan, and the user churn situation has also improved, indicating that the core subscription business is still resilient.

According to Deutsche Bank, the reduction in advertising revenue targets more reflects the timing of product launch and technology integration, and does not necessarily mean that advertisers' demand is structurally weak.

Morgan Stanley also maintains an optimistic view of Netflix. Bank analyst Sean Diffley pointed out that in the face of problems such as slowing revenue growth, declining user engagement, and the recent lack of phenomenal hits in original English content, Netflix is taking clear measures to deal with them.

However, Morgan Stanley believes that Netflix is not seeking to completely change its business model, but has chosen to further strengthen its core competitiveness by continuing to provide professionally produced TV series and movies while increasing the content of live streaming events and sporting events.

Diffley said that for investors looking forward to the company's new growth story or major strategic transformation, the current financial report may be disappointing, but Netflix's strategy of continuing to deepen content production and expand the live streaming business still has long-term value.

Jefferies, on the other hand, maintains Netflix's “buy” rating and believes that 2027 will be an important year for the company's investment logic to regain market recognition. Jefferies analyst John Colantuoni pointed out that as user participation and prospects related to mergers and acquisitions gradually become clear, investors can expect to refocus on Netflix's attractive earnings per share growth capacity, thereby driving up the current low valuation multiple times.

Seeking Alpha analyst Louis Gerard also believes that the market may have paid too much attention to the decline in advertising revenue while ignoring Netflix's progress in profitability in the third quarter. He pointed out that Netflix's revenue for the quarter was in line with the guidelines, operating profit margin increased significantly year over year, and earnings per share increased 49%. Overall, it is still a relatively steady financial report.

It is particularly noteworthy that the recovery in profit margins in the second half of the year, which the market had previously paid attention to, was already evident, and the period of improvement was earlier than expected by some investors.

Gerard believes that the sell-off in Netflix's stock price was mainly affected by two factors: first, the annual advertising revenue forecast was lowered from about 3 billion US dollars to 2.7 billion US dollars, and the second is that the fourth quarter performance outlook did not meet market expectations.

However, he tends to view the ad business falling short of expectations as an execution schedule issue rather than a fundamental deterioration in demand. At the same time, subscription revenue was higher than planned, and the user churn rate improved, which also supported the company's long-term growth.

Overall, Wall Street's disagreement with Netflix mainly focuses on whether the slowdown in growth is a short-term adjustment or a reflection of the long-term pressure brought about by increased competition in the streaming media industry.

Bearers worry that as Netflix's revenue growth falls to its lowest level in three years, the development of the advertising business may further weaken its growth prospects; those who are bullish believe that the company's core subscription business is still steady and profitability continues to improve, and that delays in the launch of advertising products do not mean a decline in long-term commercialization potential.

For investors, whether Netflix can speed up advertising product deployment, restore revenue growth momentum, and increase user participation through original content and live sports broadcasts in the future will be the key to determining whether its stock price can escape the recent weak trend.