Netflix lacks new hits: why Wells Fargo sharply downgraded its outlook on the stock

Netflix shares fell almost 5% after Wells Fargo sharply worsened its view on the largest streaming service. The bank downgraded the stock rating from Equal Weight to Underweight and cut its target price from $80 to $57, citing primarily a decline in viewer engagement and a weaker lineup of major original projects.

On Friday, September 18, Netflix shares closed at around $71.79, losing 4.7% for the day. Wells Fargo's new target of $57 is about a quarter below the share price before the publication of the analyst note.

The main question for Wells Fargo analyst Steven Cahall is not whether Netflix can continue to make money, but how much time subscribers spend on the platform and whether the service has enough new series and films that become global events.

What exactly worried Wells Fargo

According to Wells Fargo's estimate, in the first half of 2026, one Netflix subscriber watched content on average about 1.6 hours per day.

After adjusting for changes related to Netflix's crackdown on password sharing and the geographic structure of the audience, the bank estimates this figure is about 8% below the level of the first half of 2023.

Analysts are particularly concerned about Netflix's original content. Wells Fargo expects that in the second half of 2026, the number of viewing hours of the 100 most popular original projects on the service may decline by about 21% compared to the same period last year.

Cahall put the problem quite bluntly: in his view, Netflix has recently lacked major original series capable of becoming cultural events and making viewers discuss them simultaneously.

These are precisely the projects that previously gave the platform not only views but also an additional incentive to subscribe and stay a customer.

Why the comparison with last year is especially tough for Netflix

There is an important nuance to the current statistics. The second half of 2025 was very strong for Netflix thanks to major releases, including the final season of Stranger Things.

Netflix itself reported that the last season of Stranger Things garnered about 120 million views. Therefore, automatically repeating last year's figures becomes more difficult.

This is one reason why the projected decline in viewing of original content does not mean that the audience is fleeing the service en masse.

Moreover, Netflix's official data paints a less unambiguous picture than Wells Fargo's estimate.

Netflix itself says total viewing time is growing

In its second-quarter report, Netflix said that in the first half of 2026, users watched more than 97 billion hours of content — 2% more than a year earlier.

The company emphasized that this growth occurred even amid competition for attention from the Winter Olympics and the FIFA World Cup.

Thus, there is no direct contradiction between the two metrics. Netflix talks about total hours watched by its entire huge audience, while Wells Fargo estimates viewing time per subscriber and separately analyzes the biggest original projects.

It is the latter metric that the bank finds alarming: Netflix's audience remains huge, but an individual user, according to analysts' calculations, spends less time on the platform than a few years ago.

Does Netflix have no hits at all?

No. The wording about lack of hits should not be taken literally.

In the second quarter, Netflix itself called a number of new projects successful. The series I Will Find You garnered about 87 million views, the Korean drama Teach You a Lesson about 55 million, and the film Apex with Charlize Theron about 131 million.

Wells Fargo's complaint is somewhat different: analysts do not see enough new original projects of the scale of Stranger Things, Squid Game, or other series that simultaneously attract huge audiences and become the subject of mass discussion.

For a streaming business, this difference matters. A large library helps retain users, but major premieres often give new customers a reason to subscribe and reduce the likelihood that existing subscribers will cancel.

Netflix is becoming much more than a series service

In recent years, the company has deliberately expanded its entertainment offerings.

Netflix is investing in games, sports broadcasts, reality shows, documentary projects, live streams, and video podcasts. In 2026, the company continued to develop cloud gaming and integration of partners' television content.

From Netflix's point of view, this strategy makes sense: the service no longer competes only with Disney+, HBO Max, or other streaming platforms, but also with YouTube, social media, video games, and virtually any way of spending free time.

However, Wells Fargo sees a risk here.

If the company spreads investments across too many formats, it may underinvest specifically in original films and series, which have historically been one of the main reasons to pay for Netflix.

Why this matters for the stock

For investors, engagement is directly linked to Netflix's future revenues.

The more often people use the service, the easier it is for the company to retain subscribers, raise prices, and grow its advertising business. If viewing per user declines, the risk of subscription cancellations increases — especially after another price hike.

Wells Fargo therefore fears that Netflix will have to increase content spending again to restore stronger viewing dynamics.

This potentially means less room for further margin growth, which in recent years has been one of the main reasons for investor optimism.

The bank lowered its earnings forecasts for Netflix for 2027 and 2028 and simultaneously reduced the multiple used to value the company: from 21 to 15 times forward earnings.

It is the combination of more cautious forecasts and a lower valuation that led to a sharp cut in the target price from $80 to $57.

But Wells Fargo's forecast is not the Wall Street consensus

It is important to note that this is the opinion of one research house, not a unified market assessment.

Other analysts remain significantly more optimistic about Netflix. This same week, for example, Evercore ISI maintained a positive recommendation and raised its target price to $110, citing Netflix's high household penetration and international growth opportunities.

Even Wells Fargo itself acknowledges the risks of its negative scenario. Netflix spends record amounts on content, international premieres are difficult to predict in advance, and the company has repeatedly released unexpected global hits.

That is why the main test for the bearish forecast will come in the coming months: analysts will be watching whether Netflix can find its next blockbuster original project while retaining the audience of new formats — sports, games, live streams, and video podcasts.

The next important date — Netflix's earnings report

Netflix plans to release its third-quarter financial results on October 20.

However, Wells Fargo considers the next full viewing report, expected with the fourth-quarter results, even more important. That report will allow investors to see whether user engagement is indeed continuing to decline.

So far, the market reacted sharply to the analysts' warning: in one trading session, Netflix's market capitalization fell by billions of dollars.

But the fundamental debate about the company now boils down to a fairly simple question: is Netflix's vast library, sports, games, and new formats enough — or for further growth, does the service again need a series that virtually everyone will watch and discuss.

Sources: Investing.com, The Wall Street Journal, Netflix / SEC.