Shares of Netflix fell over 2.3% in premarket trading Monday after JPMorgan downgraded the streaming giant to “neutral” from “overweight”, even as it raised its price target on the stock to $1,220 from $1,150.
The new target implies a modest 2.38% upside from the company’s last close at $1,191.53.
The company has also removed Netflix from the US Equity Analyst Focus List, it said.
The downgrade comes despite JPMorgan reiterating its belief in Netflix’s long-term leadership in the global streaming industry and its potential to effectively become the world’s dominant TV platform.
Few near-term catalysts; easing trade fears could shift focus: JPMorgan
Netflix shares have surged more than 34% so far in 2025, outperforming the broader S&P 500 Movies & Entertainment index, which has risen 20.87%.
The stock also recently crossed the $500 billion market capitalization mark for the first time, underscoring investor confidence in the company’s business model and growth potential.
However, the brokerage said the stock’s significant rally over recent months has made the risk/reward outlook more evenly balanced in the near term.
Analysts said the sharp gains likely reflect much of the upside embedded in the company’s 2025 earnings guidance.
As a result, they see limited near-term catalysts to drive the stock substantially higher.
It also said that while the company’s shares have held up well, if concerns about tariffs and the broader economy continue to ease, investors may shift their focus to other internet stocks and market sectors that have been more vulnerable & pressured.
A safe haven in a volatile market
Netflix’s recent stock gains have been attributed to its perceived immunity from tariff threats and economic uncertainty.
The company imports entertainment, not physical goods, insulating it from the cost pressures that have hit other firms amid escalating trade tensions.
Even when former President Donald Trump floated a 100% import duty on foreign films, Netflix stock fell just 2% as investors bet the company could adjust by shifting production to the US or raising subscription prices.
Moreover, Netflix has historically performed well during periods of economic stress.
During the Covid-19 pandemic, it posted double-digit gains as homebound users streamed popular titles.
That history has made it a preferred choice among investors seeking stability.
According to data compiled by LSEG, the average rating of 51 analysts on Netflix is a “buy”, with a median PT of $1,150.
Valuation concerns begin to surface
At around 43 times forward earnings, Netflix’s valuation has become a topic of concern.
It trades at a premium compared to the S&P 500’s multiple of 21 and even the so-called Magnificent Seven group of tech giants, which average 27.
However, the company has historically commanded a higher premium. Its average P/E ratio over the past five years stands at 52.
Ben James, a strategist at Baillie Gifford’s US growth fund, told Barron’s that the stock’s transformation from a speculative content spender to a profitable business has justified its valuation.
The firm, which owns roughly 4 million Netflix shares valued at $4.5 billion, remains optimistic that operating margins could nearly double from the current 27% to as high as 50% by 2030.
“It’s invested so much in its own content that it’s built a flywheel that will be key to growing its margins,” James said.
“When we first invested in 2015, its margins were about 4.5%, and our forecast was they would reach 50% within 10 to 15 years. So it’s over halfway there, and we still think it can get there.”
Looking ahead to 2030
Executives are reportedly targeting a $1 trillion market capitalization by the end of the decade, according to The Wall Street Journal.
While the company has surpassed the critical $500 billion mark, the it will need to sustain rapid earnings growth and margin expansion to hit that milestone.
While short-term valuations may limit further gains, many investors remain focused on the long-term narrative that Netflix will continue to shape the future of global entertainment.
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