By Mariapaula Gonzalez

Netflix stock has soared in the past year despite recent content flops and a decline in the average amount of time subscribers spend watching its shows. Guggenheim Securities expects more outperformance.

A team of analysts led by Michael Morris reaffirmed a Buy rating on the stock and raised their 12-month target for the price to $1,400 from $1,150.

"We maintain our confidence in sustained value creation driven by industry-leading content sourcing and distribution, which we expect will yield broader revenue potential (inclusive of both pricing and potential partnerships) and margin expansion," the analysts wrote in a Wednesday note.

Still, they see challenges.

They noted that Netflix's twice-yearly Engagement Report, last released this February, shows the total amount of time spent watching the company's content has remained more or less consistent since the first half of 2023, even though their estimates indicate the total subscriber base has grown. This could mean that new members may not be watching as much as older ones, or that existing viewers are watching less.

Netflix has stopped disclosing its subscriber count since the start of this fiscal year.

Total viewing hours amounted to 94.1 billion at the end of 2024, a 0.6% increase from the start of 2023, according to Engagement Report data the analysts cited. The report showed streaming hours per subscriber per day fell from 2.2 hours in the first half of 2023 to 1.8 hours in the second half of 2024, the analysts said. That amounts to a decline of 18%.

While data from measurement firm Nielsen Gauge showed Netflix's share of domestic TV viewership climbed to 8.3% in June from 7.5% in May, the analysts estimate the company will have an average share of 7.8% in the second quarter, a drop from 8.2% in the first quarter.

The analysts also expect Netflix's U.S. viewership declined 1.5% in June from May, following a 2.5% decrease in May from April, based on its share of the entire television market. The narrower drop in viewership is largely attributable to the release of the third season of Squid Games, which amassed nearly 110 million views in 10 days, breaking a Netflix record.

What is likely to boost investors' confidence, they said, will be Netflix's expansion of sports live-content partnerships, growth in its advertising business growth and a strong roster of programming slated for release this year. That includes the final season of Stranger Things and the second season of the mystery comedy series Wednesday.

Netflix shares edged up 0.2% to $1262.96 during afternoon trading. Shares have risen 42% this year and have nearly doubled from a year ago.

Netflix's current market capitalization sits around $535 billion, but executives at the entertainment company are aiming for $1 trillion and a two-fold increase in revenue by 2030, The Wall Street Journal reported in April, citing people in attendance at an annual business review meeting. Even with Netflix's stellar gains, some Wall Street analysts are skeptical.

The Guggenheim analysts expect Netflix to post second-quarter revenue of about $11 billion, compared with the Wall Street consensus call for $11.1 billion. They anticipated adjusted fully-diluted earnings per share of $7.08, which is in line with the Wall Street consensus forecast.

The results are due after the market closes on Thursday.

Write to editors@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 16, 2025 15:57 ET (19:57 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.