Here's what Netflix skeptics are getting wrong about the stock, according to an analyst

By Bill Peters

Netflix investors are too worried about the U.S. and are overlooking gains abroad, Deutsche Bank argues

Netflix's stock is down around 24% so far this year, but Deutsche Bank analysts now see room for big gains.

Streaming giant Netflix is big enough around the world to make up for sagging viewership in the U.S., Deutsche Bank analysts said Tuesday.

Analysts at the firm upgraded shares of Netflix (NFLX) to a buy rating from a hold rating, citing increases among subscribers in time spent on the platform internationally, as well as a big lead over its rivals when it comes to production of content abroad.

"We believe the market is overly focused on domestic time spent trends (based on Nielsen data) and total time spent ... and is not giving proper consideration to international engagement trends," the analysts, led by Bryan Kraft, said in a research note on Tuesday.

The analysts trimmed their price target on Netflix to $95 from $100, to account for lower earnings estimates in the wake of Netflix's mixed second-quarter results in July. However, the new target implies 34% upside relative to Tuesday's midday level of $70.66.

Shares of Netflix were up 1.9% on Tuesday. They have fallen around 25% so far this year, reflecting concerns about weaker viewership trends.

Over the summer, those anxieties deepened after Netflix said it would publish viewership data less frequently. Netflix has faced competition from YouTube and short-form video, and some analysts have wondered whether viewers have balked at price increases.

Deutsche Bank made its upgrade after Wells Fargo analysts earlier this month cut their rating on Netflix's stock, saying the company's push into podcasts, games and live broadcasts had distracted it from making good shows and films. Wells Fargo said breakout hits were essential to reviving Netflix's stock.

The Deutsche Bank analysts on Tuesday said the weakness among domestic viewership could be due to "less creative success." But they also noted that some of the drop-off this year coincided with the Winter Olympics and the World Cup.

They also noted that time spent watching Netflix internationally has increased in the past four six-month periods. Their own analysis of data from Nielsen, Sensor Tower and Netflix itself suggested that minutes watched on the platform in the U.S. fell 8.6% in the first half of this year, while increasing 5.4% in the rest of the world.

Those trends, the analysts said, made for an international opportunity that was "less mature than the U.S. with a longer runway for growth." The analysts also said that since 2024, more than 60% of Netflix's total content production came from outside the U.S. - a result of years of investment abroad.

"This reinforces our thesis that, despite recent weakness in U.S. time spent, international content and viewership remain important drivers of Netflix's long-term growth and platform engagement," the analysts said.

They also said that podcasts, gaming and partnerships with programmers like TF1, a French television network, could bring in more ad revenue and keep people watching longer. Potential gains from those efforts aren't currently reflected in the stock price, they said.

Kraft and the other analysts at Deutsche Bank made their assessment as the film and TV industry grapples with consolidation, a production pullback in Hollywood and the possible impact of artificial intelligence on entertainment jobs. In July, Netflix said: "Gen-AI workflows now have been used in roughly 300 of our titles."

The Deutsche Bank analysts said Netflix could also use AI to personalize users' interactions with the platform and make advertising more targeted and precise. They also said that given Netflix's popularity, subscriptions to the platform were unlikely to be canceled by AI agents, which people are increasingly using to help track what services they're signed up for.

"Artificial Intelligence is more friend than foe for Netflix," the analysts said.

-Bill Peters

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09-29-26 1245ET