Netflix (NASDAQ: NFLX) is confronting an unusual paradox: millions of subscribers are staying on the platform while actively choosing not to watch it.
The streaming giant is experiencing declining engagement in the United States, even as it maintains what it describes as an industry-low churn rate across all regions.
Subscribers are not canceling, but they are not tuning in with any enthusiasm either, creating a base of what some observers are calling subscription zombies.
Netflix stock has fallen 30% this year, reflecting investor frustration with the company’s trajectory and its inability to convert retained subscribers into active viewers.
Shares dropped to their lowest level in more than two years following third quarter earnings, after the company missed estimates on current quarter revenue and its full-year advertising revenue forecast.
Analysts at Deutsche Bank are taking a contrarian position, arguing that the sharp selloff represents a buying opportunity for investors with the right conviction.
Bryan Kraft, in a note published Wednesday, pointed to international viewing growth and declining churn across every region as reasons for optimism, even as the US business underperforms.
“We found management’s commentary on churn, international viewing, new content leadership, and their long-term growth outlook all pretty encouraging,” Kraft said.
Kraft attributed the weaker domestic engagement to a softer content lineup compared to last year, rather than any fundamental deterioration in the platform’s quality or appeal.
The market, he argued, has overreacted to what is likely a cyclical content problem rather than a structural one threatening Netflix’s long-term competitive position.
Netflix’s difficulties arrive with a layer of irony, given that Paramount’s stated justification for pursuing Warner Bros. was to grow large enough to compete with the streaming leader.
The platform, long seen as a comfort streamer offering endless background viewing, now faces mounting pressure from YouTube, TikTok, and Instagram Reels, which offer passive entertainment without a subscription fee.
Recent executive shakeups have also raised questions about whether Netflix ever fully committed to the prestige television and film slate that audiences associate with rivals like Apple TV and HBO Max.
Kraft maintained that Netflix’s growth outlook remains healthy, supported by member growth, price increases, box office revenue expansion, and a developing advertising business.
“We believe the market’s reaction was overly punitive,” Kraft said, signaling Deutsche Bank’s confidence that the current valuation does not reflect the company’s longer-term earnings potential.
