Phillip Capital: Netflix (NFLX.US) user engagement decreasing and overvaluation, rating lowered to "Sell"

Phillip Capital has downgraded its rating on Netflix (NFLX.US) from "Neutral" to "Sell" while maintaining a target price of $950. According to an analysis team led by Helena Wang, the rating adjustment was due to recent price increases. They remain cautious due to the stock being "overvalued" and a decrease in audience engagement, which could lower ad revenue and make it difficult to double ad revenue by 2025. Phillip Capital still believes that Netflix has strong resilience, is less affected by tariffs, and has strong profit growth momentum. The research firm stated, "Netflix continues to dominate the video-on-demand services sector, benefiting from its significant pricing advantage and improving profit margins. Netflix's diversified content library is paying off and will continue to yield returns." However, they believe that the growth rate of new members may significantly accelerate, based on revenue growth in the first half of 2025 (up 14% year-on-year), leading to a decrease in average spending per viewer. The research firm stated, "Lower user engagement means fewer ad impressions per user, directly leading to a decrease in ad revenue. However, part of the reason for this may be Netflix's restrictions on account sharing, causing occasional or infrequent viewers to use separate accounts with lower user engagement."