Netflix shares closed down 1% at $71.36 on September 23, deepening a slump that has made the streaming giant one of the market's notable underperformers this year.

The stock has fallen 11% in September and is down 23% since the start of the year. By comparison, the S&P 500 has gained 13% over the same stretch, making Netflix's slide stand out even more.

The pressure stems from a growing worry on Wall Street: viewers appear to be spending more time on Google's YouTube and less on Netflix. Two major banks have now turned that concern into formal downgrades, putting hard numbers behind the worry.

HSBC Downgrade Points to YouTube Living-Room Growth

HSBC made its move on September 22, cutting its rating on Netflix (NFLX) from Buy to Hold and dropping its price target from $96 to $76. The bank cited YouTube's growing dominance as the central risk to the company's outlook.

Analyst Mohammed Khallouf pointed to YouTube's growth in living-room viewing. The platform captured a record 14.2% share of U.S. TV viewing time in July, an increase of 80 basis points (0.8 percentage points) from a year earlier. Netflix, meanwhile, slipped to a multi-year low of 7.8%, down 100 basis points — a full percentage point — year over year. For a platform leaning harder on advertising, time spent on screen is effectively the inventory it has to sell, one reason those share figures sit at the center of the debate. Khallouf said Netflix's decline is tied to a cooler reception for the company's original content.

What Is Driving the YouTube Threat

YouTube has been paying top creators directly for exclusive content. The platform also rolled out a new "Shows" feature this summer that mimics Netflix-style episodic series, further blurring the line between video-sharing and traditional streaming. That shift also raises the cost for Netflix to build a content library capable of competing for viewers' time.

Wells Fargo echoed the caution last week with its own downgrade of the stock. Its analysts expect viewing hours from Netflix's top 100 original titles to fall 21% from a year ago. HSBC's research found a similar pattern: viewing hours for English-language Top 10 content dropped about 17% year over year in July and August.

Netflix's second-quarter earnings report did little to ease those concerns. Sales missed estimates, third-quarter guidance came in cautious, and viewing hours grew only 2% in the first half of the year — figures that underscore the engagement slowdown both banks flagged. That makes the third-quarter report the next checkpoint for the engagement numbers at the heart of the downgrade case.

Where Netflix Sees Opportunity

Despite the pressure, Netflix has a counterpunch: advertising and live sports. The company says its U.S. upfront ad commitments for 2026 — deals negotiated in the annual upfront market, where media sellers lock in spending from major advertisers ahead of the season — nearly doubled from the prior year. It has also expanded its suite of tools for advertisers, including automated ad buying and sharper audience targeting.

Live sports remain a key piece of that plan. Netflix added the NFL's first regular-season game in Australia to its 2026 schedule, and a Thanksgiving Eve matchup along with additional holiday games are also on the way. Those events could draw in casual viewers who skip regular Netflix shows, and they give advertisers a shot at the kind of large, simultaneous audiences that streaming rarely offers. They also double as visible tests of whether live programming can shift the viewing-hour trends both banks flagged.

Valuation and Analyst Views

Netflix's valuation has shifted as well. The stock now trades at about 21 times expected earnings, down from roughly 31 times at the end of 2025, reflecting this year's decline in the share price.

HSBC raised its content spending estimates for Netflix in 2027 and 2028 while lowering its earnings-per-share forecasts for those same years — a combination that means more spending without a corresponding lift in engagement would keep pressure on the shares.

Wall Street overall remains bullish, however. Analysts hold a Strong Buy consensus rating on NFLX, based on 25 Buys, seven Holds, and one Sell over the past three months, with an average price target of $94.34. That target implies roughly 32% upside from current levels. HSBC's reduced $76 target sits well below that average, a measure of how sharply the downgrade camp has broken from the broader Street.