Analysts Eye 30% Upside in Netflix After Q3 Earnings Crash

Key Points

• Issues from abroad plagued Netflix's Q3 2025 earnings release. Shares fell 10%.
• However, the firm believes the cause of its miss is an isolated incident. Adjusting for the issue shows that NFLX's fundamentals were robust.
• Wall Street analysts changed their price targets little after the results. Many now see big upside potential in shares.

After surging through the first half of 2025, streaming behemoth Netflix NASDAQ: NFLX has now given up half its gains. Through June 30, Netflix shares were up by more than 50%. After the company’s Q3 2025 earnings, the stock’s year-to-date gain has dropped to 25%.

Netflix closed down 10% on Oct. 22 as markets reacted to the entertainment stock’s latest financials. However, a disappointing earnings report can sometimes create a significant opportunity for investors. Below, we’ll analyze the firm’s results and examine ensuing Wall Street price target updates. The data shows that analysts are now forecasting substantial upside potential in Netflix shares in the neighborhood of 30%.

Brazil Throws a Wrench in NFLX’s Otherwise Solid Results

In Q3, Netflix posted revenue of just over $11.5 billion, or a growth rate of 17.2%. This was essentially in line with expectations. The big disappointment came on adjusted earnings per share (EPS), which clocked in at $5.87. This missed the estimates by $1.01. Wall Street anticipated that Netflix’s adjusted EPS would rise by over 27%, but the firm only achieved an 8.7% increase. 

This miss came mainly from one key factor: a $619 million tax expense from Brazil. This expense, which Netflix accumulated over more than three years, was a result of a Brazilian Supreme Court ruling in August against another company. The ruling expanded the breadth of taxable Netflix transactions beyond what was legal in the past.

Without the expense, Netflix’s adjusted EPS likely would have beaten estimates, possibly to a significant degree. Netflix’s operating margin would have been around 33% excluding the charge, versus 28% with the charge. That would have handily surpassed its 31.5% operating margin guidance.

Importantly, Netflix does not expect this issue to impact it going forward. The big takeaway for investors is that Netflix’s underlying fundamentals remained strong, providing support for its long-term bull case.

Still, Netflix is a multinational company, which introduces certain risks. In fact, 56% of its revenue came from outside the United States and Canada in Q3. Revenue also saw the fastest currency-neutral growth in the Latin America and Asia Pacific regions. 

Thus, Netflix may have to contend with other unexpected international issues going forward. However, the company said there is no tax in any other major country it operates in that looks or behaves like the one in Brazil.

Analysts Brush Off Netflix’s Brazilian Blemish

The MarketBeat consensus price target on Netflix stands at around $1,340, implying approximately 20% upside from recent levels. However, examining updates published after the company’s earnings release indicates that Netflix’s Q3 EPS miss did not faze Wall Street analysts. 

Only a small number of the analysts tracked by MarketBeat adjusted their targets—and among those with prior data, the average target declined by just 2.2%, far less than the stock’s actual 10% drop.

Furthermore, the average target among all forecasts is just under $1,460, suggesting that Netflix shares could rise slightly more than 30%. That amount of implied upside potential is out of the ordinary for Netflix, whose share price typically shows little deviation from average targets. This provides more evidence that Netflix shares may be attractively valued.

Wall Street Eyes New Highs as NFLX’s P/E Nears 3-Year Average

It is important to note that this $1,460 target is still optimistic. It suggests that shares will rise around 9% above their previous all-time high closing price of nearly $1,340. Looking at Netflix’s forward price-to-earnings (P/E) shows that the company’s valuation is down, but not to an overwhelming extent.

Its approximately 35.5x forward P/E has fallen 27% from its three-year peak of 50x. However, it is still around 5% above Netflix’s average forward P/E of 34.5x during that period.

Netflix’s recent pullback could represent a compelling buy-the-dip opportunity. Advertising revenue, live sports, and further international expansion are all real and abiding growth areas. Netflix also sees significant room to grow in the United States, where it makes up only around 10% of time spent watching TV.

Streaming services continue to take share from linear TV, which still controls around 43% of U.S. watch time. This is another key tailwind aiding Netflix’s outlook.