Netflix’s Lower Valuation Meets a Slower Growth Test

Netflix shares have fallen about 41% over the past year, bringing the stock’s forward price-to-earnings ratio to 20.96, according to Barchart. The valuation case is drawing attention as investors weigh a lower share price against slower growth and questions about viewing trends.

The immediate growth concern is Netflix’s forecast for third-quarter revenue of $12.86 billion, up 11.7% from a year earlier. That would be the slowest annual growth in three years, Barchart reported.

The forecast follows second-quarter revenue of $12.56 billion, a 13% increase year over year, according to Netflix’s filing. The company attributed the gain to membership growth, price increases and higher advertising revenue.

Engagement is another pressure point. Wells Fargo analyst Steven Cahall estimated that viewing time in the first half of 2026 was 8% lower than in the first half of 2023, after adjusting for households added through Netflix’s password-sharing crackdown.

Cahall also warned that the second-half content lineup could weigh on margins. The concern is that Netflix may need more successful shows to keep viewers watching, even as it manages spending and protects profits.

The business still has growth levers. Netflix expects about $3 billion in advertising revenue this year, roughly double its 2025 level, and its second-quarter filing showed net income rose 9% to $3.4 billion.

Barchart cited a forward earnings multiple of 20.96 and an average analyst price target of $95.23, implying 32.7% upside from the price used in its analysis. Those targets are forecasts, not a guarantee that the stock will recover.

Investors will look for evidence that new shows and advertising can sustain revenue growth without squeezing margins. Netflix is scheduled to report third-quarter results on October 15, making its next outlook a key test of the bargain argument.