Netflix's $72 Billion Warner Bros. Discovery Acquisition Faces 20% Stock Drop Risk
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
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Source: NASDAQ.COM
- Significant Acquisition Risk: Netflix's announcement of a $72 billion acquisition of Warner Bros. Discovery has raised investor concerns about overpaying, resulting in a 20% drop in stock price since the announcement, highlighting the deal's potential pitfalls.
- Weak Growth: During the earnings call, Netflix revealed that viewing hours on its platform only increased by 2% year-over-year, prompting analysts to question the necessity of the acquisition, which underscores the challenges the company faces in a competitive entertainment market.
- Heavy Debt Burden: The acquisition will add $10.7 billion in net debt to Netflix's balance sheet, with the cash payment amounting to nearly six times its current net income, thereby increasing financial pressure and uncertainty for the company moving forward.
- Strategic Transition Challenge: While WBD's assets are attractive, Netflix must demonstrate the value of this acquisition, especially given its strong business performance, leading investors to adopt a cautious stance regarding this strategic shift.
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: 88.000
Low
92.00
Averages
129.47
High
152.50
Current: 88.000
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.
