• Deutsche Bank (DB) upgraded Netflix (NFLX) to Buy from Hold, citing global scale, international production, and AI tailwinds.
  • Price target trimmed to $95 from $100, but implies roughly 37% upside from recent levels.
  • Analyst Bryan Kraft argues the selloff has created an attractive entry point, with shares trading at just 18x 2027 earnings.

Deutsche Bank Turns Bullish on Netflix After Sharp Selloff

Deutsche Bank upgraded Netflix to Buy from Hold on Monday, a contrarian call after a brutal 2026 for the streaming giant. The bank lowered its price target to $95 from $100, but that still implies roughly 37% upside from the September 28 close. Analyst Bryan Kraft argued that Netflix's global scale, international production network, and AI-enabled productivity are being underpriced at about 18 times projected 2027 earnings—far below the roughly 40 times multiple the stock commanded at its 2025 peak.

The upgrade comes as Netflix shares have tumbled more than 14% in September alone and are down over 26% year to date. That decline has left the stock trading more like a mature media company than a platform with global expansion opportunities, according to Deutsche Bank. "The market is overlooking Netflix's structural advantages in brand, worldwide subscriber base, and ability to commission and distribute content internationally," Kraft wrote in a note to clients.

Valuation Reset Creates Opportunity

The central debate on Netflix is no longer whether it remains profitable—it clearly does—but whether its growth in engagement, subscriptions, pricing, and advertising can justify renewed valuation expansion. Deutsche Bank believes it can.

Netflix reported second-quarter revenue of $12.56 billion, up 13.4% year over year, and net income of $3.40 billion, or $0.80 per share. Operating income rose 11% to $4.2 billion, with an operating margin of 33.4%. While revenue growth has decelerated from 17.6% in Q4 2025 to 13.4% in Q2 2026, management maintained its full-year revenue outlook of $51.0–$51.4 billion, representing 13%–14% growth, and expects operating margin to expand to 31.5% from 29.5% in 2025.

The company's advertising tier is a key part of the bull case. Netflix aims to roughly double ad revenue to about $3 billion in 2026, and its advertiser base surpassed 4,000 clients in the first quarter, up 70% year over year. The ad-supported plan also represented more than 60% of new sign-ups in ad-tier markets during Q1. "Advertising is becoming a material second revenue engine," Deutsche Bank noted.

AI: More Friend Than Foe

Deutsche Bank also views artificial intelligence as a net positive for Netflix, with opportunities across content production, personalization, and advertising. The firm believes AI can improve production workflows, visual effects, discovery algorithms, and ad targeting—all while helping content spending grow slower than revenue.

Netflix expects content expenses to rise about 10% in 2026, to roughly $20 billion, below projected revenue growth. If achieved, that would support further margin expansion. However, the company has also formalized boundaries for AI use in production, prioritizing copyright, data security, consent, and union protections. Netflix's own guidance warns that AI-generated output may pose copyright problems and requires heightened legal review where work involves key creative elements, talent likenesses, or third-party intellectual property.

A Crowded Attention Market

While Netflix's advertising ambitions are growing, competition remains fierce. YouTube generated $11.1 billion in ad revenue in Q2 alone, dwarfing Netflix's full-year 2026 target of around $3 billion. Netflix also faces slowing viewing growth—viewing hours rose only 2% in the first half of 2026—and increasing competition from Disney+, Amazon Prime Video (AMZN), Max, and social platforms.

Still, Netflix management estimates it has penetrated less than 45% of roughly 800 million addressable households worldwide and captures only about 7% of a roughly $670 billion addressable revenue pool. That opportunity underpins Deutsche Bank's optimism.

What to Watch

Investors will look to Netflix's Q3 2026 results, with consensus expectations near $12.87 billion in revenue and $0.82 in EPS. Evidence that advertising can reach the $3 billion goal, performance of international originals, and clarity on engagement trends after the company decided to make its "What We Watched" report annual rather than semiannual from 2027 will all be key catalysts.

The bullish case rests on Netflix combining global distribution, a large content budget, price optimization, and advertising technology to sustain double-digit revenue growth and margin expansion. The risk case is that slowing viewing growth foreshadows market saturation, that advertising remains small relative to digital-ad incumbents, and that AI savings fail to materialize before associated legal and labor risks become costly.

Netflix did not immediately respond to a request for comment on the upgrade.