Netflix stock falls following Wells Fargo downgrade over engagement concerns

Netflix shares fell nearly 5 percent on Friday following a downgrade from Wells Fargo. Analyst Steven Cahall issued an underweight rating, warning that the stock price could potentially decline by approximately 20% to $57.

The downgrade is driven by concerns regarding viewer engagement trends. Cahall noted that Netflix has lacked major original series recently, which may lead to a decline in views for the company’s top 100 original shows. The report suggests that as advertising becomes a larger portion of Netflix’s business, maintaining watch hours and subscriber gains is increasingly critical.

To address these engagement risks, the analyst suggested several potential but difficult paths for the company, including increasing content spending, licensing third-party content such as live sports, or pursuing mergers and acquisitions. However, increased spending could impact profit margins, and potential acquisitions could trigger expensive bidding wars.