Netflix has spent years convincing investors that it can keep growing, keep finding hit shows and keep taking a bigger share of viewers’ time.
That confidence is starting to fade.
Netflix shares are down 26% this year, putting the stock on track for its worst annual performance since 2022. The bigger concern is not simply the share price. It is whether Netflix can keep people watching as competition for their screen time gets tougher.
Wall Street is getting less bullish
The shift in sentiment has become hard to ignore.
- HSBC downgraded Netflix to Hold, pointing to signs of weakening subscriber engagement.
- Wells Fargo also cut its rating, giving Netflix one of its first sell-equivalent ratings in months.
- Of the 65 analysts covering Netflix, 48 now have Buy ratings, the lowest number since March.
- The stock is now 48% below its June 2025 peak.
For a company that has traditionally enjoyed strong support from Wall Street, that change matters.
Investors are beginning to ask a simple question: What will drive the next leg of Netflix’s growth?
The problem is not just subscribers
Netflix still has more subscribers than any other paid streaming service.
But subscriber numbers only tell part of the story.
What matters increasingly is how much people watch and whether Netflix can keep them coming back.
That is especially important as Netflix builds its advertising business. More viewing time gives Netflix more opportunities to serve ads and generate revenue from its audience.
If engagement weakens, the advertising opportunity becomes harder to maximize.
And this is where Netflix is facing some criticism.
Analysts have pointed to a lack of major breakout shows this year. Netflix has released well-received content, but some shows have struggled to hold audiences beyond their first season.
For a streaming platform, that can become a serious problem.
You need people to have a reason to open the app again and again.
YouTube is becoming a bigger threat
Netflix is no longer competing only with Disney, Amazon or other streaming platforms.
Its biggest battle may increasingly be with YouTube.
YouTube accounted for 14.2% of US TV viewing in July, according to Nielsen data cited by Bloomberg Intelligence. Netflix’s share was below 8%.
That gap is important because viewers have a limited amount of time to spend watching screens.
HSBC analyst Mohammed Khallouf argued that YouTube’s gains are increasingly coming at Netflix’s expense, linking the shift to weaker reception for Netflix’s original content.
YouTube also has one major advantage: there is an endless supply of new content.
Netflix has to continually invest in expensive movies and shows to keep its library fresh. YouTube has millions of creators producing content every day.
That makes the competition for attention very different from the traditional streaming battle.
Netflix needs another wave of hits
Netflix has been here before.
Some of its biggest successes appeared almost out of nowhere.
Squid Game, Adolescence and KPop Demon Hunters all showed how quickly a breakout title can change the conversation around the platform.
That is why the current weakness does not necessarily mean Netflix has lost its ability to create hits.
But investors want to see evidence.
Netflix has money to spend on content. The question is whether that spending is consistently producing shows that become cultural events rather than simply filling the catalogue.
One investor quoted by Bloomberg described Netflix as a “show-me story”, arguing that the company needs to prove it can deliver the kind of blockbuster programming that keeps viewers engaged.
That may be the biggest issue facing the stock right now.
Competition is coming from outside streaming too
There is another interesting shift happening.
The traditional cinema business has been having a surprisingly strong year, helped by major movie releases.
Shares of AMC Entertainment, Cinemark and IMAX have all gained more than 50% this year, significantly outperforming the broader market.
At the same time, Apple’s streaming service has been making noise at the Emmy Awards.
The message for Netflix investors is clear: great entertainment can still pull people away from their usual habits.
Netflix does not need to beat every competitor. But it does need to remain one of the first places people think of when they want something worth watching.
The stock is cheaper, but is it cheap enough?
This is where the Netflix story gets interesting for investors.
After the selloff, Netflix is trading at roughly 19 times estimated earnings.
That is more than 60% below its 10-year average valuation of almost 50 times earnings.
On the surface, that looks attractive.
But a lower valuation does not automatically mean a stock is cheap.
If earnings growth is slowing and investors become less confident about the company’s future, the market may simply be assigning Netflix a lower valuation for a reason.
The real question is whether the current price already reflects the growth concerns.
Earnings will be the next big test
Netflix reports its third-quarter results on October 20.
Wall Street expects:
- Revenue growth of nearly 12%
- The slowest revenue expansion since 2023
- Net income growth of around 36%, compared with 8% a year earlier
Those numbers will give investors a better look at whether the current concerns are temporary or part of a bigger change in Netflix’s growth trajectory.
Investors will likely be watching more than just revenue and profit.
Engagement, advertising growth, subscriber trends and management’s outlook could be just as important.
If Netflix shows that viewers are coming back, advertising is scaling and new content is gaining traction, the current valuation could start looking much more attractive.
If engagement continues to weaken, the pressure on the stock could continue.
So, is Netflix becoming a value play?
There are two very different ways to look at Netflix today.
The cautious view:
Netflix is facing tougher competition, weaker engagement and slower growth. YouTube is taking more TV viewing, while rival streamers are producing popular content. A cheaper stock does not solve those problems.
The bullish view:
Netflix still has the world’s largest paid streaming audience, a powerful global brand and a history of producing unexpected hits. It is also expanding into advertising, sports, podcasts and gaming, creating new ways to grow beyond traditional subscriptions.
That makes Netflix an interesting stock to watch, but not necessarily an easy one to call.
The market is no longer rewarding Netflix simply for being Netflix.
Now, the company has to prove that it can keep viewers engaged, create the next wave of hits and turn its massive audience into sustainable growth.
And with earnings coming up, investors will soon get their next clue.