Netflix Taking Significant Steps to Address Engagement Issues, Wedbush Says

10:55 AM EDT, 10/16/2026 (MT Newswires) -- Netflix (NFLX) is making significant changes to address slowing viewer engagement and revive growth, though the benefits may take time to materialize, Wedbush Securities said in a Friday note. Netflix faces modestly declining viewer engagement as consumers spend more time on YouTube and short-form social media, according to Wedbush. However, the streaming company's large subscriber base, low churn rates and extensive content library continue to make it an attractive platform for advertisers, the brokerage said. Late Thursday, Netflix announced the appointment of Peter Rice as its new chief content officer, effective Oct. 26. Rice most recently served as chairman of Walt Disney Television and chairman of general entertainment at Walt Disney (DIS), overseeing Fox Broadcasting, Fox Sports and several other businesses. Wedbush believes Rice's experience at Fox and Disney could help Netflix pursue a potential studio acquisition or expand its theatrical business and broader entertainment offerings. Netflix plans to lay off about 1,000 employees, or 6% of its workforce, amid growing competition for viewers from traditional rivals and YouTube, Reuters reported earlier in the week. "Concerns have lingered since Netflix reported (second-quarter) earnings, and Netflix has recently made significant changes to address them and shift the business in a direction that could reinvigorate profitable growth," Wedbush analyst Alicia Reese wrote. Wedbush analysts believe that Netflix's ad revenue remains on track to double to roughly $3 billion this year, as the brokerage reiterated its outperform rating on the stock ahead of the release of the company's third-quarter results on Tuesday. However, it trimmed the price target to $90 from $105. Netflix's second-quarter results released in July showed revenue fell short of Wall Street's estimates, while the company said it will no longer publish its engagement report semi-annually. Wedbush expects third-quarter earnings per share of $0.83, surpassing the consensus of $0.82 that matches management's guidance. The brokerage is looking at revenue of $12.87 billion, compared with consensus of $12.88 billion and guidance for $12.86 billion. Shares of Netflix were down 2.1% in Friday trade, taking its year-to-date losses to 24%. The company is scheduled to announce its third-quarter results on Oct. 20. Price: 71.24, Change: -1.38, Percent Change: -1.89