Netflix Stock Slides on HSBC Downgrade Amid Growing Competition Concerns

Netflix (NFLX) shares slipped more than 2% in morning trading on Tuesday after an analyst at HSBC lowered the company's stock rating, marking the second bearish call from a major Wall Street firm in less than a week. The move amplifies investor concerns over intensifying competition, rising costs, and weakening user engagement for the streaming giant.

HSBC Cites Competition, Spending

HSBC analyst Mohammed Khallouf downgraded Netflix from "Buy" to "Hold" and cut his price target on the stock by roughly 21%, from $96 to $76. The bank's note cited intensifying competition from YouTube as a key factor.

Khallouf also flagged a higher projected content-spending burden for Netflix. He expects this increased spending to compress the company's earnings estimates in 2027 and 2028, reducing the stock's near-term appeal for investors.

Echoes of an Earlier Bearish Call

The HSBC action follows a recent downgrade on September 18 from Wells Fargo analyst Steven Cahall, who moved Netflix to "Underweight" with a $57 price target. That call, which sent shares down approximately 5% last week, has continued to weigh on market sentiment.

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Cahall pointed to what he described as "worrying" engagement trends, including:

• An estimated 8% decline in viewing time per subscriber per day compared to the first half of 2023.
• A projected 21% year-over-year drop in hours watched for the platform’s top 100 original titles.

Broader Industry Headwinds Mount

Adding to the pressure are signs of consumer fatigue with subscription costs, a trend analysts call "streamflation." A new Ipsos survey found that 39% of Americans canceled at least one streaming subscription in the six months through mid-September, a sharp increase from 29% in March.

Meanwhile, the competitive landscape is poised to intensify. A settlement announced on September 21 involving Paramount Skydance clears a key hurdle for its potential $110 billion acquisition of Warner Bros. Discovery. Such a deal would create a significantly larger rival, adding a long-term overhang for Netflix.