After a hard start to the year, Netflix (NFLX) is finally enjoying some time in the green.

Shares of the streaming giant continued to surge on Tuesday — up more than 6% in late afternoon trading as investors digested the platform's Q2 earnings report, which showed subscriber losses coming in narrower-than-expected (-970,000 versus the estimated -2 million).

Despite the positive Wall Street reaction, however, "a lot remains to be figured out," Piper Sandler analyst Tom Champion told Yahoo Finance Live in a new interview.

"The big challenge for Netflix is executing and transition — they've got to get beyond their password sharing issues and they've got to introduce an advertising tier" to offset some of these subscriber losses, the analyst advised.

Netflix, which lost 200,000 users in April and revealed softer-than-expected guidance for Q3, has battled an uptick in subscriber churn, or the number of customers that drop off the service. That comes amid increased competition, with some industry watchers warning that a "streaming recession" is on the horizon. The streaming giant plans to introduce an ad-supported tier next year to ease some of these woes.

As growth slows, "the amount of subscribers may no longer be the paramount [key performance indicator] for a lot of these streaming services," said Anthony Palomba, professor of business administration at UVA’s Darden School of Business.

He suggested that the attention has now shifted to other forms of monetization like advertising.

Piper Sandler's Champion agreed, adding that the ad-supported tier will be "essential" for Netflix to get back to the subscriber growth cadence it's enjoyed in the past as the streaming giant approaches peak penetration levels in developed markets like the U.S. and Canada.

Still, a potential downside risk could be more subscribers trading down in favor of a new ad tier.

"The consumer is pinched — it's a trickier environment today than it was a year ago. Tiering down is probably going to be a reality," Champion admitted.