But shares have fallen 7% since peaking in June, a sign that investors are becoming cautious about its lofty valuation and lack of details about customer growth. [File]
Photo courtesy: Reuters
Netflix shares fell more than 7% in premarket trading Wednesday as the streaming giant’s outlook for the coming quarter disappointed investors despite a strong line-up of shows, which also includes the final season of “Stranger Things.”
Investors have become accustomed to the company’s regular outperformance, which has driven the stock up more than 360% over the past three years, far ahead of media giants like Walt Disney and even tech giants Apple and Alphabet.
It has gained additional attention with the widespread success of the animated “Kpop Demon Hunters”.
But shares have fallen 7% since peaking in June, a sign that investors are becoming cautious about its lofty valuation and lack of details about subscriber growth. The company’s forward price-to-earnings multiple is around 40, much higher than other media companies and major tech names.
“Shares have enjoyed a strong run this year, so expectations were already high, and with valuations well above its long-term average, there is increased pressure to not only perform but outperform,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Netflix projected revenue of $11.96 billion for the fourth quarter, while Wall Street estimated $11.9 billion. Third-quarter revenue was $11.5 billion, broadly in line with forecasts, according to LSEG data.
The company has ventured into advertising and video games to diversify its revenue sources, but these businesses have struggled amid competition as well as changes in leadership and strategy.
For the third quarter, Netflix said, without giving any numbers, that it had its best ad sales quarter in history.
Analysts at Wedbush called the company’s latest guidance “tremendous” after several quarters of exceptional results, saying, “Netflix should soon demonstrate that its ad program can drive growth to justify a higher multiple.”
Netflix stopped reporting subscriber figures in early 2025.
The company is counting on its major releases through the end of the year including “Stranger Things” and two NFL games set to stream live on Christmas Day.
However, Evercore ISI analysts suggested investors should buy on any dips in the stock, noting that competitors Disney+ and HBO Max have raised their subscription prices, giving Netflix enough cover to boost its rates.
The Connecticut-based firm missed third-quarter profit estimates due to a $619 million charge related to an ongoing tax dispute in Brazil. JPMorgan analysts described the expenses as “noise”, noting that “the big focus is the lack of revenue growth in the back half of the year.”
“With no client numbers, some lawyers are grasping at straws to find any signs of weakness, as the company is significantly stronger than its rivals,” said Paolo Pescatore, analyst at PP Foresight.
published – October 23, 2025 09:01 am IST