Netflix Inc (NASDAQ:NFLX, ETR:NFC) delivered another blockbuster quarter, beating estimates and raising its full-year outlook, yet its shares fell almost 5% with analysts pointing to sky-high investor expectations as the cause.
Analysts at Bank of America and UBS largely agree on the strength of the streaming giant’s fundamentals, attributing the market’s tepid reaction more to Netflix’s elevated valuation than any shortfall in the results themselves.
“With shares up more than 40% year-to-date and trading at approximately 40x, we believe expectations remain elevated, which, in our view, largely explains the muted stock reaction,” Bank of America analysts wrote.
The analysts highlighted that revenue, up 16% year-over-year at $11.08 billion, was ahead of guidance, driven by subscriber additions, pricing power, and ad momentum. Operating income, EPS, and free cash flow all beat BofA’s forecasts.
The bank’s analysts see continued momentum ahead for Netflix. “In our view, Netflix remains among the best-positioned companies in media and entertainment with sustainable growth drivers that should prove to be predictable and defensive amid a wide range of macroeconomic scenarios,” they wrote.
BofA increased its 2025 revenue forecast to $45.1 billion and operating margin to 30.1%, both near the top of Netflix’s new guidance ranges.
The firm also repeated its 'Buy' rating and $1,490 price objective, citing the company’s competitive positioning.
“Supported by its world-class brand, leading global subscriber scale, position as an innovator and increased visibility in growth drivers, we believe that Netflix will continue to outperform,” the analysts concluded.
Netflix ‘a secular winner’
UBS analysts also remain bullish on Netflix, noting that the Q2 report supports their conviction that the company is “a secular winner.”
They pointed to the long-term runway suggested by management’s updated outlook. With Q3 revenue growth guided at 17% FX-neutral and operating income expected to rise 25%, the firm noted: “The updated guidance implies FX-neutral revenue growth will be approximately 16% in Q4, providing a strong launch point for 2026.”
On the engagement front, UBS highlighted modest year-over-year growth and a stable base of viewing time.
The analysts expect marquee content, including Squid Game and Wednesday, to drive renewed interest in the back half of the year, supported by a growing push into live programming and first-party advertising technology.
“Management still expects ad revenue to double in 2025, supported by recent upfronts, and has completed the rollout of its first-party ad tech platform in all ad markets,” they wrote.
UBS raised its free cash flow forecast to $9 billion for 2025 and expects $10 billion in share buybacks over the next 12 months.
The firm maintained a ‘Buy’ rating and raised its price target to $1,495 from $1,450.
“We believe secular trends and competitive dynamics, including a pullback in content spend and shift away from mass market approach at peers, remain supportive of Netflix’s ability to drive stronger monetization and operating leverage,” UBS concluded.
Shares of Netflix traded down 4.7% at about $1,215 in the early afternoon on Friday.