Netflix Inc (NASDAQ:NFLX, XETRA:NFC) shares head into this week's earnings report under pressure after a weaker-than-expected third quarter and softer fourth quarter guidance, Wedbush analysts believe, noting that investors will be focused on whether advertising momentum and subscriber trends can reaccelerate growth.
The analysts believe that the recent share price decline reflects both execution questions and lingering uncertainty tied to a pending Warner Bros transaction. “Shares have been in decline since Netflix reported underwhelming Q3 results and Q4 guidance, after several quarters of phenomenal results, amid the overhang from the contentious pending WB acquisition,” the analysts wrote.
Despite that backdrop, Wedbush said Netflix’s expanding advertising business remains a key longer-term driver that investors may be underappreciating.
Wedbush’s analysts expect Netflix’s ad segment to play an increasingly central role in the company’s growth profile. “We think Netflix is positioning for substantial growth in global advertising, and that should not be overlooked,” they wrote, pointing to expanding partnerships, improved ad targeting, and a growing slate of live content.
They added that Netflix is expected to roll out interactive ads over time and eventually integrate purchasing opportunities and performance marketing capabilities. “We expect ad revenue to become Netflix’s primary revenue driver in 2026, with significant opportunities in 2027,” the analysts wrote.
For the fourth quarter, Wedbush projected revenue of $11.96 billion, broadly in line with the consensus estimate of $11.97 billion, and earnings per share of $0.55, matching expectations.
The firm also estimates more than $9 billion in free cash flow for 2025, roughly in line with company guidance. According to Wedbush, results and outlook should underscore “steady subscriber growth coupled with rising ARM driven by price increases and a growing ads business.”
Survey data cited by Wedbush points to stable performance in the fourth quarter and a potential pickup early next year. The survey also suggests that recent price increases are contributing to higher average revenue per member, while users on the ad-supported tier are increasingly less likely to move to premium plans, supporting low churn and enhancing the platform’s appeal to advertisers.
While reiterating an ‘Outperform’ rating, Wedbush lowered its 12-month price target to $115 from $140, reflecting a reduced valuation multiple amid ongoing merger-related uncertainty.
They added that improved ad targeting, interactivity, and commerce features could still drive upside over the next several years.
Shares of Netflix traded hands at $88 on Monday morning, down almost 6% in the year to date.
Netflix is scheduled to report its Q4 results on Tuesday after the market closes.
- Updated with share price movement -