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Investing.com -- JPMorgan (NYSE:JPM) downgraded Netflix (NASDAQ:NFLX) to Neutral from Overweight, citing reduced risk-reward appeal following a sharp rally in the stock recently.

The bank maintained a positive long-term view on the company’s streaming leadership but said the near-term setup looks more balanced. Netflix shares are now trading at record highs and have gained nearly 400% since October 2022, far outpacing the broader market.

The Wall Street firm raised its December 2025 price target on Netflix shares to $1,220 from $1,150, but noted the valuation now reflects much of the expected upside.

The stock, which is trading at all-time highs, is currently valued at 39x JPMorgan’s 2026 GAAP EPS estimate and 44x projected free cash flow (FCF). According to JPMorgan, the stock likely already reflects potential upside to the company’s 2025 guidance.

Alongside the downgrade, the bank has also removed Netflix from its U.S. Equity Analyst Focus List.

The firm’s analyst Doug Anmuth points out that Netflix has been a defensive play during recent macro and tariff uncertainty, but that could change if the broader environment improves.

“If tariff&macro concerns continue to ease, we would expect rotation into other Internet names&parts of the market that have been more vulnerable&pressured,” Anmuth wrote, adding that he continues to prefer Amazon (NASDAQ:AMZN) and Meta (NASDAQ:META).

But Netflix’s fundamentals remain strong, Anmuth notes. The analyst projects double-digit FX-neutral revenue growth through 2026, margin expansion, a ramp-up in free cash flow, and increased share buybacks.

Advertising is also gaining traction, with the ad-supported tier now at meaningful scale and Netflix expecting to double ad revenue in 2025.

For the near term, Anmuth flags risks such as seasonal softness during summer and a quieter catalyst path after the company’s Upfront event. Although upcoming content remains strong, the analyst believes “the risk/reward in NFLX shares is less compelling” after the recent outperformance.

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