Netflix shares have fallen by a quarter since the start of the year. Should you buy them before the earnings report?

Since the beginning of the year, Netflix shares have fallen 25% and are hovering near their 12-month low. The streaming giant will release its third-quarter results on October 20 after the U.S. market closes, and past performance does not bode well: the company’s stock has fallen following each of its five previous quarterly reports, notes The Wall Street Journal.

Investors are increasingly concerned about viewing trends, according to Barron’s. The average viewing time per Netflix subscriber fell from 66 hours per month in the first half of 2023 to 49 hours in January–June 2026, according to a Jefferies estimate cited by Reuters. Viewers’ attention is being drawn away by videos from bloggers, which are crowding out expensive TV shows and movies: according to Nielsen, people in the U.S. watch YouTube for nearly twice as long as they watch Netflix.

This has also affected the stock price, according to StoneX Financial analyst Daniel Curnos: “The situation has likely worsened since the last earnings report: in September alone, the stock fell 14% as third-party data continued to show that YouTube is taking market share away from Netflix, and one of the company’s two CEOs, Ted Sarandos, acknowledged that Netflix is ‘not growing as fast as we’d like’” (quoted from The Hollywood Reporter).

Following this admission, the company began making personnel changes: Netflix veteran Bela Bajaria will be replaced as chief content officer by former Disney executive Peter Rice. BMO Capital Markets analyst Brian Pitz saw this change as a sign that viewer engagement may have weakened even further in the third quarter and lowered his forecasts, according to THR.

Although subscribers have been watching Netflix less, the company’s revenue continues to grow. According to LSEG, the market expects the streaming giant to report an 11.8% increase in revenue for July–September, to $12.87 billion. This would be the slowest third-quarter growth rate in three years. Evercore ISI analyst Mark Mahaney believes one of the key questions surrounding the earnings report is whether weak audience engagement is starting to become a problem for sales, Barron’s reports.

Netflix is reporting less and less about its viewership, according to the WSJ: the company has not disclosed its subscriber count since early 2025. This summer, the company announced that it would release its viewership report once a year instead of twice. In this situation, what Netflix executives say about subscriber churn and subscription prices will be a key indicator for Wall Street, emphasizes Mahani of Evercore.

But according to the analyst, the company’s forecast will play a major role in determining the stock price: “In July, the third-quarter forecast fell short of Wall Street’s expectations across the board. If the same thing happens with the fourth-quarter forecast, that will be the main risk to the stock’s performance.”

Netflix is betting on advertising to diversify its revenue, Reuters notes. Wedbush Securities analyst Alisha Reese advises keeping an eye on this: “Engagement remains at the heart of the bears’ arguments, but ad revenue is more important” (quoted in THR). She expects this figure to double by 2026, to approximately $3 billion.

Morningstar believes Netflix’s current valuation appears reasonable: it puts the stock’s fair value at $80 and believes that the slowdown in revenue growth is already priced in. Guggenheim analyst Michael Morris calculated that the stock is trading at a P/E ratio of about 22 based on his 2026 earnings forecast—in line with the market as a whole—and, based on 2027 earnings, is 25% cheaper than Alphabet and Meta. In his view, this is an attractive price for the sustainable growth of the core business.

According to the WSJ, the consensus recommendation among analysts is “outperform” (Overweight), just as it was three months ago, and the average target price of $90.65 per share is 30% higher than the last closing price ($69.85). However, during this time, the number of “Buy” ratings has dropped from 34 to 31, and two “Sell” ratings have appeared. Some of the optimists have become more cautious: BMO, Wedbush, and Morgan Stanley have lowered their target prices, although they have maintained a positive outlook on Netflix shares, according to THR.

BMO analyst Brian Pitz advises investors to be patient: “Netflix may find it difficult to significantly outperform the market in the near term, but long-term investors will be rewarded as the company evolves into one of the leading performance advertising platforms” (quoted in THR).

Daniel Cournos of StoneX is taking a cautious approach: he recommends “holding” the stock and does not provide a price target. Alisha Rees of Wedbush, who is counting on growth in Netflix’s advertising business, warns that due to sweeping changes at the company, that growth could be delayed, according to THR.

This article was AI-translated and verified by a human editor