Investors shouldn’t be too worried about Netflix’s (NASDAQ: NFLX) recent slowdown in viewer engagement, according to Wolfe Research. In fact, the firm believes the streaming company’s stock could be ready for a rebound as stronger content and live programming help bring viewers back.
At the moment, Wolfe Research has an outperform rating on NFLX and recently raised its price target to $95 from $84, adding that weaker second-quarter engagement was mostly caused by the timing of new content releases, rather than a major problem with NFLX’s business.
“After analyzing millions of data points from Netflix’s viewing history,” Supino said, the timing of content releases was largely responsible for the weaker second-quarter results. He also believes the streaming company has a stronger lineup coming in the third quarter and that its growing focus on live programming is starting to pay off, as noted by CNBC.
Netflix’s Recent Results Disappointed Investors
Netflix reported its second-quarter results in July.
The company’s financial results were mostly in line with Wall Street expectations. However, NFLX lowered its full-year revenue outlook to between $51 billion and $51.4 billion. Its previous forecast was between $50.7 billion and $51.7 billion. The updated forecast worried investors. Another major concern is whether the streaming company can keep attracting and retaining customers as competition in the streaming industry grows.
Consumers now have many streaming services to choose from, making it harder for Netflix to stand out and keep people subscribed.
Netflix has also raised its subscription prices, which could make some customers reconsider whether the service is worth the cost. Another challenge is that Netflix stopped reporting quarterly subscriber numbers last year. Subscriber growth was once one of the most important numbers investors watched after each earnings report.
Without that information, investors now have to look at other signs of the company’s health, including revenue, viewing activity and customer engagement.
A Stronger Content Lineup Could Help
Wolfe Research believes those concerns may be overblown.
The firm expects NFLX to have a stronger second half of the year, helped by a better schedule of new shows and movies. The idea is simple: when Netflix has more popular content available, people are more likely to spend time watching the service.
The firm believes the weaker engagement in the second quarter was more about when NFLX released its content than a lack of viewer interest. If the company’s upcoming shows and movies perform well, engagement could improve and help ease investor concerns. Live programming could also become an important part of the company’s strategy.
The company has been putting more money and attention into live events, including sports and entertainment programs. Wolfe Research believes these efforts are beginning to add value and could help Netflix attract more viewers.
What Comes Next for Netflix?
Looking ahead, Wolfe Research expects NFLX to report better results later this year and provide solid guidance for 2027. If that happens, investors could become more confident about the company’s future growth.
Netflix still faces plenty of challenges. Competition remains strong, subscription prices are rising, and investors have fewer subscribers to track. But Wolfe Research believes the company’s recent weakness may be temporary rather than a sign of a larger problem.
With a stronger content lineup and more live programming on the way, NFLX could have an opportunity to turn things around. That is why Wolfe Research believes investors should look past the recent engagement concerns and focus on the company’s potential for improvement in the months ahead.
