Netflix Shares Under Pressure as Major Acquisition Overshadows Strong Performance

Netflix US64110L1061

Despite reporting robust quarterly results, Netflix's stock is being weighed down by investor concerns surrounding a colossal planned acquisition. The streaming giant's share price, currently fluctuating between $84 and $86, has retreated significantly from its highs over the past six months. Market attention is firmly fixed on the proposed multi-billion dollar cash purchase of Warner Bros. Discovery and the substantial risk the deal introduces.

Financially, Netflix's core business demonstrates continued vigor. On January 20, the company released its Q4 2025 earnings, delivering a positive surprise.

Key Q4 2025 Metrics:
- Revenue: Increased to $12.05 billion
- Subscribers: Surpassed 325 million paid memberships
- Earnings Per Share (EPS): $0.56, exceeding analyst forecasts
- Advertising: Ad-supported revenue grew 2.5x to $1.5 billion

Paradoxically, the market response to this solid report was negative. The stock closed a recent session at approximately $84.64, marking a 1.1% daily decline. This brings its six-month loss to around 27%. Analysts point to a cautious outlook for 2026 and, more prominently, the overwhelming focus on the potential Warner Bros. Discovery takeover.

The $82.7 Billion Deal Casts a Long Shadow

The primary source of uncertainty is Netflix's adjusted offer to acquire Warner Bros. Discovery (WBD) for an estimated $82.7 billion in cash, announced on January 20. The strategic move aims to secure Warner Bros. and HBO's extensive content library. However, the financing required is expected to significantly increase Netflix's debt load, raising alarms about balance sheet health.

This skepticism is embodied by actions from major investors. For instance, Polen Capital completely exited its Netflix position in Q4 2025, citing "regulatory risks" and the "increased debt burden" from the proposed acquisition as explicit reasons.

Complicating the situation, a competing bid has emerged. Paramount Skydance has presented a rival offer for WBD valued at $108.4 billion. This bidding war injects further uncertainty regarding the final purchase price and suggests a potentially protracted regulatory review process.

Divided Analyst Sentiment

The analyst community reflects the market's conflicted view. On January 27, Freedom Capital upgraded Netflix from "Hold" to "Buy," viewing the recent share price weakness as a buying opportunity.

In contrast, Goldman Sachs reduced its price target from $112 to $100 on January 21, while maintaining a "Neutral" rating. This divergence between upgrades and target cuts underscores the difficulty in weighing strong operational performance against substantial acquisition risk. Nonetheless, a majority of covering analysts—approximately 76%—maintain "Buy" or "Strong Buy" recommendations.

Valuation and Key Stock Considerations

Following its pullback, Netflix trades at a price-to-earnings (P/E) ratio of about 33.7. Given its growth in subscribers and advertising revenue, the stock is not considered cheap, which amplifies its sensitivity to additional risks like acquisition-related debt.

Current Stock Snapshot:
- Price: ~$84.64 (previous close)
- Six-Month Decline: ~27%
- P/E Ratio: ~33.69
- Analyst Consensus: Majority maintain Buy ratings
- Primary Overhang: The planned $82.7 billion cash acquisition of WBD

Outlook: Acquisition Dynamics to Drive Volatility

For now, the stock's trajectory has decoupled from its operational performance. Valuation is being dictated by merger arbitrage and expectations surrounding the potential WBD purchase.

Until the bidding contest with Paramount Skydance is resolved and regulatory approvals are clarified, volatility is likely to persist. The key determinants for future share price movement will be the final terms of any deal and the subsequent strain on Netflix's financial structure—even if subscriber growth and advertising revenue continue their upward trend.

@ boerse-global.de | US64110L1061 NETFLIX