Huber Research analyst Craig Huber double-downgraded Netflix to Underweight from Overweight this week and cut his 12-month price target to $70 from $85.
The firm doesn't use neutral ratings, so the move skipped a step. Huber listed six reasons, starting with press reports of a planned headcount cut.
Those reports landed. Netflix is eliminating roughly 1K jobs worldwide, about 6% of its workforce, the largest round since 2022.
The cuts mainly hit human resources, legal, product and technology teams, and come less than a week before third-quarter results. Co-CEOs Ted Sarandos and Greg Peters told staff the company remains on track to deliver its full-year forecast.
Engagement is the number investors are watching
Total global viewing hours rose 2% to 97B in the first half of 2026, which Huber estimates is down around 5% on a per-subscriber basis.
Third-party app data points the same direction. Netflix's US churn, meaning members who stop opening the app, rose 16.6% year over year in the third quarter, double the 7.8% increase in the second quarter.
That marks a seven-quarter consecutive churn increase. Downloads in the US and Canada fell 20% year over year to 7.4M, while downloads in APAC rose 10% to 19.5M and European churn fell 2%.
Huber isn't alone. Wells Fargo cut Netflix to underweight on Sept. 18 with a $57 target, and HSBC moved to hold four days later.
Less disclosure, more competition
Netflix decided in mid-July to publish viewer engagement reports once a year starting in the first quarter of 2027, down from twice a year. Huber called the change a bad sign and expects the next report to disappoint.
He also expects Netflix to be less aggressive on US price increases, and sees rising content spend as rivals including YouTube, Disney+, and Amazon Prime compete for the same hours.
The industry is consolidating around them after Paramount's $110B merger with Warner Bros. Huber flagged a further risk that Netflix attempts a large acquisition following its failed bid for Warner Bros. Discovery about 10 months ago.
Sarandos addressed growth at last month's Bloomberg Screentime conference.
"We want to keep growing it faster."
Ted Sarandos, Netflix Co-CEO
Netflix reports third-quarter results on Oct. 20 after the close, with analysts forecasting revenue of roughly $12.87B. Engagement metrics, not the revenue line, could decide how the quarter reads.
