Netflix Inc (NASDAQ: NFLX) remains worth investing ahead of its third-quarter earnings release, scheduled for Tuesday (after the bell), says Michael Morris, a senior Guggenheim analyst.
Analysts expect Netflix to report revenue of $11.51 billion, up more than 17% from a year earlier, and earnings of $6.96 per share, an increase of roughly 29%, for its fiscal third quarter.
The stock has already surged about 45% since its April low.
However, Morris believes the upcoming results could set the stage for further gains, potentially pushing Netflix shares to a new all-time high of $1,450 by 2026.
Rising engagement to drive Netflix stock price higher
With subscriber disclosures now phased out, engagement has become the primary lens through which analysts evaluate NFLX stock performance.
Michael Morris now sees engagement as “the most important metric” and believes Q3 saw notable improvement on that front.
The quarter featured a robust content slate, including the latest season of Squid Game, Wednesday, and K-pop Demon Hunters.
These titles helped boost platform stickiness and viewer hours, which Morris sees as a “great first step” toward validating the core business.
If engagement trends continue to strengthen, it could reinforce Netflix’s pricing power and ad-tier growth – both of which are critical to long-term shareholder returns, he told CNBC in an interview today.
What AI-generated content means for NFLX shares
Artificial intelligence (AI) is emerging as both a challenge and an opportunity for Netflix shares.
The Guggenheim analyst acknowledged the uncertainty around AI-generated content – noting that “there are some pros and some cons.”
On the one hand, AI could lower production costs and enhance personalisation.
On the other hand, it could intensify competition, especially from platforms like YouTube that thrive on short-form content.
Morris believes Netflix’s strength lies in its brand and intellectual property, which will be essential to “cutting through the clutter” in an AI-saturated media landscape.
As NFLX builds out its proprietary IP and explores efficiencies, investors will likely see margin expansion and new monetisation pathways, which together will drive the streaming stock higher from here.
Netflix’s management never rests – and that’s bullish
One of the most compelling reasons to own NFLX shares ahead of the earnings release, according to Michael Morris, is the company’s undying commitment to innovation.
“They never rest,” the analyst said, pointing to recent moves like live content partnership in France, exclusive video podcasts with Spotify, and expanding mobile games to TV screens.
Netflix Inc is also courting top short-form creators and exploring deeper involvement in sports, including a potential NFL investment.
These initiatives reflect a proactive strategy to diversify engagement and revenue.
Morris believes this mindset positions Netflix stock to stay ahead of the curve, making it a dynamic long-term holding for investors seeking growth in the evolving media landscape.
His price target signals potential upside of another 17% from here.
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