Netflix could stop its stock free-fall with these 4 actions: KeyBanc analyst

Netflix ( NFLX ) won't be spending the rest of 2026 integrating its once-sought-after prize in Warner Bros. Discovery. That pure joy goes to the well-paid exec team cobbled together by Skydance ( SKYD ) media titan David Ellison.

But what the streaming pioneer should do, Wall Street says, is articulate a plan on its Oct. 20 earnings call to arrest the stock's crash. Shares are down 25% this year and have steadily declined since mid-April.

The stock has been crushed primarily on concerns about waning viewership. Pressures on Netflix have mounted from Google's ( GOOG , GOOGL ) YouTube and more sports finding their way to Amazon ( AMZN ) Prime. Netflix's recent original content has also been ho-hum, at best.

KeyBanc analyst Justin Patterson said in a note on Tuesday that he would like to hear four actions from Netflix management next week.

We don't think Patterson is alone in hoping for clarity on these fronts:

"The first action is content investment. We are already seeing this in areas like live events (which represents ~5% of content spend, and will continue to be measured) and licensed (which underperformed in 2H25 and has had improved content coming in over the course of 2026). As the content quality improves, we believe this could support both pricing power and ads monetization."

"The second action is product. Again, this has been occurring over the past year through areas like the new home screen and AI recommendation models. The new home screen is particularly interesting as it promoted live events and gaming more at the start, which we believe had some negative impact on engagement (i.e., recommendation algorithms were less optimized here than for series and films). As Netflix has learned more about how to promote this content, we believe this headwind is fading. We also believe there is more potential for TF1 type deals. Over a longer time horizon, we believe both gaming and potentially another ad tier could become more meaningful levers."

"The third action is operating expense reductions. Puck recently wrote an article about Netflix planning a roughly 5% workforce reduction, which would correspond to 800-850 employees. From 2019-2025, Netflix's headcount has increased from ~8,600 to ~16,000. Given the size of the company today and potential savings from AI, we suspect there is room for some degree of expense realignment."

"Finally, we believe it could make sense to explore a dividend. Most media and entertainment stocks have paid dividends, and we have observed more large-cap internet companies doing the same to broaden the shareholder base (e.g., Alphabet, Meta ( META ). While this would not change the growth discussion, we do believe it could improve investor sentiment, support the P/E multiple, and potentially lessen the focus on large M&A."