1 of Billionaire Investor Bill Ackman's Newest Positions Is Down Roughly 21% This Year. A Wall Street Analyst Thinks Another 21% Decline Is Coming. Should Investors Sell the Stock?
I'm LongbridgeAI, I can summarize articles.Bill Ackman's Pershing Square holds a $934 million Netflix position, down 21% this year. Wells Fargo analyst Steven Cahall downgraded Netflix to underweight with a $57 price target, citing weak engagement trends and lack of hit series. Despite concerns over AI and short-form video competition, Ackman believes the sell-off is overdone, arguing Netflix remains a utility-like service. The stock trades at 22.5x earnings, below its five-year average, presenting a favorable risk-reward proposition.
In the second quarter of the year, Bill Ackman's Pershing Square Inc. put new money it had raised earlier this year to work by initiating a new position in the streaming giant Netflix (NFLX -4.57%).
At the end of the second quarter, the position was valued at over $934 million, consuming 4.8% of Pershing's $19.47 billion of assets at the time.
It's been tough sledding for Netflix, with shares down over 40% in the past year. Netflix stock hit an all-time high in mid 2025 before a new set of challenges emerged.
To make matters worse, Wells Fargo analyst Steven Cahall recently downgraded Netflix to underweight and lowered his price target from $80 per share to $57, implying nearly 21% downside from current levels.
Should investors sell the stock?
Image source: Getty Images.
Engagement trends are concerning
"Engagement trends look worrying to us," Cahall stated in his note. "Netflix has lacked big original series and it's showing... We see breakout hits as a must for the stock to work again."
Concerns about engagement really began toward the end of last year, when Netflix announced plans to acquire certain assets from Warner Bros. Discovery, including HBO Max's film and television studios.
The acquisition ultimately did not come to fruition due to an intense bidding war following the initial announcement, which made investors wonder why Netflix wanted to pursue it.
After all, the company has largely been successful through organic growth, and many investors had declared it the winner of the streaming wars. More media reports began to surface that Netflix has grown concerned about engagement due to shorter attention spans and competition from artificial intelligence.
NASDAQ: NFLX
Key Data Points
In July, Netflix announced that it would go from publishing a closely watched engagement report detailing what consumers were watching on the platform twice a year to once a year.
This further concerned investors, who believed something was amiss with engagement trends.
Netflix has also been pursuing other forms of content. The platform has recently added video podcasts and has reportedly offered deals to popular YouTube content creators to start publishing on Netflix.
It's not just Netflix that has been facing challenges in the content space. All forms of content have seemingly been disrupted by consumers' shorter attention spans and AI, which presents challenges ranging from how consumers find content to how content is produced.
Should investors sell the stock?
Not everyone is bearish on Netflix; investors like Ackman clearly believe the sell-off is overdone.
In Pershing's interim report published in June, Ackman and Pershing's Chief Investment Office, Ryan Israel, wrote that they believed, "... time reallocated toward short-form video is far more likely to come from share donors like linear TV or lower-quality streaming services than from a utility-like service such as Netflix."
Regarding AI, they believe that people are underestimating just how expensive it is to create "... long-form, high-quality video, which remains among the most compute-intensive AI tasks."
I would somewhat agree with Ackman and his team's view on this. Threats from short-form content and AI are industrywide challenges, and Netflix should be well-positioned to overcome them, especially considering the company's track record for innovation.
However, I don't entirely disagree with Cahall, either, regarding Netflix needing new and exciting original series. I personally don't use Netflix excessively to watch old content.
I'm more drawn to the platform for new, original series like "Stranger Things," and I'm guessing that's a big draw for others, too, especially given rising subscription prices in recent years.
While no one knows for sure what the future will look like, with Netflix now trading at roughly 22.5 earnings, well below its five-year average of 39.5x, I like the risk-reward proposition.