Netflix Stock Drops 11% Amid Bidding War for Warner Bros.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
0mins
Should l Buy NFLX?
Source: NASDAQ.COM
- Stock Decline: Netflix's stock fell 11% in January 2026, indicating investor unease regarding the potential acquisition of Warner Bros., as a solid fourth-quarter report failed to halt the downward trend.
- Intensified Acquisition Competition: The $82.7 billion all-cash bid from Netflix faces threats from Paramount Skydance's hostile takeover attempt, which urges Warner Bros. shareholders to reject Netflix's deal, adding to market uncertainty.
- Significant Financial Impact: A successful acquisition of Warner Bros. would radically alter Netflix's balance sheet, particularly due to the need for substantial borrowing to finance the deal, potentially increasing future financial pressures.
- Complex Market Outlook: Currently, Netflix's stock trades 38% below its all-time high set in June 2025, and while sales are growing at double-digit rates, investors remain anxious about clarity and the outcome of the shareholder vote.
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Analyst Views on NFLX
Wall Street analysts forecast NFLX stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NFLX is 129.47 USD with a low forecast of 92.00 USD and a high forecast of 152.50 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
38 Analyst Rating
27 Buy
9 Hold
2 Sell
Moderate Buy
Current: 79.940
Low
92.00
Averages
129.47
High
152.50
Current: 79.940
Low
92.00
Averages
129.47
High
152.50
About NFLX
Netflix, Inc. is a provider of entertainment services. The Company acquires, licenses and produces content, including original programming. It provides paid memberships in over 190 countries offering television (TV) series, films and games across a variety of genres and languages. It allows members to play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time. The Company offers members the ability to receive streaming content through a host of Internet-connected devices, including TVs, digital video players, TV set-top boxes and mobile devices. It is engaged in scaling its streaming service, such as introducing games and advertising on its service, as well as offering live programming. It is developing technology and utilizing third-party cloud computing, technology and other services. The Company is also engaged in scaling its own studio operations to produce original content.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Surging Ad Revenue: The ad revenue exceeded $1.5 billion in 2025, marking a more than 150% increase, with expectations to double again to about $3 billion by 2026, demonstrating Netflix's successful pivot and expanded audience reach.
- Successful Strategic Shift: The introduction of a cheaper ad-supported tier in November 2022, despite previous rejections of ads, effectively addressed the challenge of subscriber loss in 2022, showcasing the management's adaptability.
- Risks and Opportunities: While Netflix's price-to-earnings ratio is near a three-year low, making it attractive for investment, the plan to take on $42 billion in debt financing for the Warner Bros. Discovery deal introduces significant uncertainty, necessitating careful risk assessment by investors.
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- Sentiment vs. Fundamentals: The current selloff is driven more by sentiment than by fundamentals, as the software sector invests heavily in AI, yet the market extrapolates worst-case scenarios, creating a stark disconnect between prices and actual conditions.
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- Strong Competitor Performance: Meta's Instagram Reels saw over a 30% year-over-year increase in watch time in the U.S., while Netflix's viewing hours only grew by 2% in the second half of 2025, highlighting Netflix's disadvantage in user engagement.
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- Need for Strategic Adjustments: Netflix is proactively working on enhancing its mobile user interface to support growth in vertical video formats; however, with the rise of mobile devices, Netflix must reassess its growth strategy to tackle future challenges.
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- Market Share Dynamics: While Netflix's share of TV viewing time in the U.S. increased by 20% over the past three years, the overall streaming market (excluding Netflix) saw a staggering 92% rise in penetration, indicating Netflix's competitive disadvantage.
- Mobile UI Improvements: Netflix is proactively enhancing its mobile user interface to support growth in vertical video formats, and although users spend an average of two hours daily on the platform, Meta's engagement growth poses a threat to its future performance.
- Uncertain Future Outlook: As mobile devices are likely to command more attention over the next five to ten years, the competitive pressure on Netflix will intensify, prompting investors to cautiously adjust their growth expectations.
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- Market Share Insights: Sarandos noted that Netflix accounts for about 9% of total U.S. TV viewing time, projecting that even after merging with Warner Bros. Discovery, it would only reach around 10%, underscoring Netflix's limited market share and the necessity of competing against platforms like YouTube.
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- Emerging Advertising Business: The nascent advertising segment contributed approximately 3% to total revenue in 2025, further driving paid membership revenue growth, indicating significant progress in diversifying revenue streams for the company.
- Operating Margin Expansion: Despite competitive pressures, Netflix's operating margin increased from 26.7% in 2024 to 29.5% in 2025, with expectations to expand further to 31.5% in 2026, reflecting ongoing improvements in cost management and profitability.
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See More
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- Strong Financial Performance: Netflix's Q4 2025 revenue and diluted earnings per share showed strong double-digit year-over-year growth, indicating the company's sustained high-level operations despite competitive market pressures.
- Surging Ad Revenue: The ad revenue exceeded $1.5 billion in 2025, marking a more than 150% increase, with expectations to double again to about $3 billion by 2026, demonstrating Netflix's successful pivot and expanded audience reach.
- Successful Strategic Shift: The introduction of a cheaper ad-supported tier in November 2022, despite previous rejections of ads, effectively addressed the challenge of subscriber loss in 2022, showcasing the management's adaptability.
- Risks and Opportunities: While Netflix's price-to-earnings ratio is near a three-year low, making it attractive for investment, the plan to take on $42 billion in debt financing for the Warner Bros. Discovery deal introduces significant uncertainty, necessitating careful risk assessment by investors.
See More
Software Stocks Face Valuation Collapse Amid Market Panic
- Valuation Collapse: According to Liz Thomas, Head of Investment Strategy at SoFi Technologies, the software sector's forward 12-month P/E ratio has plummeted from 33.1x to 23.2x, a 30% contraction that indicates a drastic reduction in growth expectations, reverting to levels seen in 2022 and during the pandemic.
- Panic Selling Intensifies: Five major software companies are experiencing drawdowns reminiscent of the Covid-era stress, reflecting extreme pessimism in market sentiment, as investors express serious concerns about the future of the software industry, leading to significant price volatility.
- Sentiment vs. Fundamentals: The current selloff is driven more by sentiment than by fundamentals, as the software sector invests heavily in AI, yet the market extrapolates worst-case scenarios, creating a stark disconnect between prices and actual conditions.
- Investor Strategy Shift: With P/E ratios compressed and fear dominating the market, the real risk lies not in buying too early but in missing the rebound, prompting investors to carefully assess market sentiment and potential recovery opportunities.
See More
Netflix Faces User Attrition Challenges Amidst Rising Competition
- Shift in Viewing Habits: Since 2019, adults have spent more time on mobile devices than watching TV, putting Netflix under pressure as user-generated short-form content gains popularity, which challenges its growth expectations moving forward.
- Strong Competitor Performance: Meta's Instagram Reels saw over a 30% year-over-year increase in watch time in the U.S., while Netflix's viewing hours only grew by 2% in the second half of 2025, highlighting Netflix's disadvantage in user engagement.
- Market Share Comparison: Although Netflix's share of TV viewing time in the U.S. increased by 20% over the past three years, the overall streaming market's penetration rate surged by 92%, indicating Netflix is falling behind in the competitive landscape.
- Need for Strategic Adjustments: Netflix is proactively working on enhancing its mobile user interface to support growth in vertical video formats; however, with the rise of mobile devices, Netflix must reassess its growth strategy to tackle future challenges.
See More
Netflix Faces Competitive Pressure from Meta
- Engagement Challenges: Netflix's stock has skyrocketed 2,580% over the past 15 years, yet it faces significant competition from Meta, which has achieved over 30% year-over-year growth in watch time for Instagram Reels in the U.S. by optimizing mobile content.
- Market Share Dynamics: While Netflix's share of TV viewing time in the U.S. increased by 20% over the past three years, the overall streaming market (excluding Netflix) saw a staggering 92% rise in penetration, indicating Netflix's competitive disadvantage.
- Mobile UI Improvements: Netflix is proactively enhancing its mobile user interface to support growth in vertical video formats, and although users spend an average of two hours daily on the platform, Meta's engagement growth poses a threat to its future performance.
- Uncertain Future Outlook: As mobile devices are likely to command more attention over the next five to ten years, the competitive pressure on Netflix will intensify, prompting investors to cautiously adjust their growth expectations.
See More
Netflix Defends Warner Bros Acquisition Before Senate
- Streaming Competition Perspective: Netflix co-CEO Ted Sarandos testified before the U.S. Senate, highlighting YouTube's significant influence in the television space, with approximately 50% of YouTube viewing now occurring on TV screens, challenging the traditional view of YouTube as a mobile-first service and indicating a fundamental shift in the streaming competition landscape.
- Market Share Insights: Sarandos noted that Netflix accounts for about 9% of total U.S. TV viewing time, projecting that even after merging with Warner Bros. Discovery, it would only reach around 10%, underscoring Netflix's limited market share and the necessity of competing against platforms like YouTube.
- Acquisition Details: Netflix recently proposed an all-cash offer valued at $82.7 billion for Warner Bros. Discovery's studio and streaming businesses, securing unanimous board approval and sidelining rival Paramount, which is expected to grant Netflix control over HBO Max and several major film franchises.
- Investor Reaction: Ross Gerber, co-founder of Gerber Kawasaki, praised Sarandos's testimony as well-articulated, reflecting market interest and support for Netflix's acquisition plans, despite the company's stock falling 3.41% on Tuesday.
See More
Netflix Reports Strong 2025 Financial Performance Amid Competitive Pressures
- Significant Revenue Growth: Netflix's revenue surged 16% year-over-year to $45 billion in 2025, with global subscribers surpassing 325 million, showcasing the company's robust performance amidst fierce competition, even as its stock price fell 10% since the beginning of 2025.
- Emerging Advertising Business: The nascent advertising segment contributed approximately 3% to total revenue in 2025, further driving paid membership revenue growth, indicating significant progress in diversifying revenue streams for the company.
- Operating Margin Expansion: Despite competitive pressures, Netflix's operating margin increased from 26.7% in 2024 to 29.5% in 2025, with expectations to expand further to 31.5% in 2026, reflecting ongoing improvements in cost management and profitability.
- Intensifying Market Competition: Management highlighted an
See More
