Netflix Downgraded Ahead of Stock Split

Analyst Downgrade Reflects Cautious Sentiment

Netflix (NASDAQ:NFLX) has recently been downgraded by Erste Group Bank from a "Buy" to a "Hold" rating, signaling increasing caution among research analysts. The downgrade comes as Netflix prepares for a notable 10-for-1 stock split, set for November 17th, a move that could increase share accessibility for retail investors but also introduces additional volatility around the event.

This shift in rating aligns with a broader range of analyst sentiment. While two analysts have issued a "Strong Buy" and twenty-seven maintain "Buy" ratings, there are also eleven "Hold" and two "Sell" ratings. The consensus among analysts is currently a "Moderate Buy," with an average price target of $1,341.12, according to MarketBeat.

Earnings Miss and Financial Performance

Netflix’s most recent quarterly results have added to the mixed outlook. The company reported earnings per share of $5.87, notably missing the consensus estimate of $6.88. While revenue climbed 17.2% year-over-year to $11.51 billion, it came in just shy of analyst expectations ($11.52 billion). The company maintains a robust net margin of 24.05% and an impressive return on equity of 41.86%, but the earnings miss reflects rising content costs and intensifying streaming competition.

Looking forward, Netflix has issued guidance for Q4 2025 with EPS in the range of $5.45, and full-year analyst consensus points to $24.58 EPS. The stock currently trades at a price-to-earnings (P/E) ratio of 45.49 and a price/earnings-to-growth (P/E/G) ratio of 1.91, suggesting investors are still willing to pay a premium for growth in the streaming sector.

Stock Performance and Upcoming Split

Shares of Netflix opened at $1,089.00 on Friday, following a one-year range between $747.77 and $1,341.15. The company's market capitalization stands at $461.44 billion, with a moderate level of leverage (debt-to-equity ratio of 0.56) and a current ratio of 1.33, indicating healthy liquidity.

The upcoming 10-for-1 stock split, announced on October 30th, will take effect on November 17th. This move is expected to make the stock more accessible to a broader base of investors. Historically, stock splits do not affect a company’s intrinsic value but can influence trading dynamics and investor sentiment in the short term.

Insider and Institutional Activity

Recent insider activity has seen CEO Theodore A. Sarandos and other executives reducing their personal stakes. Over the last ninety days, insiders have sold roughly 78,734 shares worth over $93 million, though insiders still collectively own 1.37% of the company.

Institutional investors continue to hold the majority of Netflix shares. Major holders like Vanguard Group, State Street, and Price T Rowe Associates have modestly increased their positions, and in total, 80.93% of Netflix’s shares are institutionally held, reflecting ongoing confidence among large investors despite recent headwinds.

Looking Ahead

Netflix remains a dominant force in the streaming industry, expanding its content library and exploring new revenue streams such as gaming. However, the recent downgrade, earnings miss, and the impact of the upcoming stock split create a more nuanced outlook for the near term. Investors will be watching closely to see how the company manages rising competition and evolving consumer habits in the months ahead.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Investing involves risk, including the loss of principal. Past performance is not indicative of future results. Analyst opinions referenced are those of third parties and are subject to change.