J.P. Morgan moves to the sidelines on Netflix as risk/reward appears balanced

J.P. Morgan on Monday downgraded Netflix (NASDAQ:NFLX) to “neutral” from a previous investment rating of “overweight,” citing a more balanced risk/reward scenario following its “significant” stock price appreciation and outperformance.

The research firm noted that NFLX shares are at an all-time high and currently trade at 39x 2026E GAAP earnings per share and 44x 2026E free cash flow.

Given its digital subscription-based nature, they view the stock as “highly defensive” against tariff and macro concerns. But if tariff and macro pressures continue to ease, JPM expects investment dollars to rotate from defensive names to those that have been more vulnerable and under pressure.

JPM thinks NFLX is entering less favorable summer seasonality, and following the Upfront event last week, it may also have a quieter catalyst path ahead, even though it has compelling content for the third quarter.

The research firm, however, continues to stay bullish long-term on the company’s ability to maintain its leadership in streaming and global TV.

“We believe NFLX is a key beneficiary and driver of the ongoing disruption of linear TV, with Netflix’s content performing well globally and driving a virtuous circle of strong subscriber growth, more revenue, and growing profit. With 300M+ global subs, Netflix has a strong leadership position in a rationalizing streaming industry, and we expect NFLX to benefit from the global proliferation of Internet-connected devices and increasing consumer preference for on-demand video consumption over the Internet,” JPM analysts said in their May 19 research note.

NFLX’s price target was hiked to $1,220 from $1,150, implying an upside of 6%. Stock is up 33.7% so far this year, while the benchmark S&P index is up 1.3%. Shares of the company are currently down 1.9% in premarket trading.