Netflix (NFLX) remains undervalued relative to its long-term earnings growth despite investor concerns over slowing engagement and higher churn following recent price increases, Morgan Stanley said in a Tuesday note.

The investment firm said it expects largely in-line Q2 results and Q3 guidance, along with a reiteration of full-year 2026 guidance.

Morgan Stanley noted investor concerns over slowing engagement are well understood and that viewing hours have a weaker relationship with revenue growth than many investors assume.

While third-party data point to somewhat higher churn following recent price increases, the firm said its survey suggests Netflix continues to have the strongest perceived original content, broadest content library and continued long-term pricing power.

Netflix is scheduled to report its Q2 earnings on Thursday.

Morgan Stanley maintained its overweight rating on Netflix and lowered its price target to $90 from $115.