Netflix closed at a 52-week low near $79 on February 14, down 42% from its June 2025 peak. The numbers look ugly, but the actual business looks fine. Q4 revenue came in at $12.1B (up 18% year-over-year), EPS beat at $0.56, and the company crossed 325 million paid memberships. Ad revenue more than doubled to over $1.5B for 2025, with management guiding for roughly $3B in 2026.
So why is the stock getting hammered?
The Warner Bros deal is the whole story
Netflix's amended all-cash bid for Warner Bros Discovery — roughly $83B — is dominating the stock's price action. The deal, first announced in late 2025 and revised to all-cash in January, would give Netflix HBO Max's content library and WBD's studio infrastructure. On paper, it's a content moat play. In practice, it's a mess.
Paramount Skydance launched a competing hostile tender at $30 per share, sweetened with $650M quarterly payments if the deal isn't closed by end of 2026. Activist investor Ancora Holdings is publicly urging WBD's board to reject Netflix's bid in favor of Paramount's terms. Institutional shareholders are running out of patience.
Then there's Washington. The DOJ is reviewing antitrust implications. Senate testimony has been floated. Hollywood unions are gearing up to fight consolidation under a single streaming giant, citing job protection and creative independence concerns.
The fundamentals don't justify this price
Strip away the deal noise and Netflix looks solid:
- Revenue guidance for 2026: $50.7B to $51.7B (12-14% growth)
- Operating margin target: 31.5%, up from 29.5% in 2025
- Free cash flow guidance: roughly $11B
- Ad business scaling fast, content spend growing around 10%
Co-CEO Gregory Peters sold 27,312 shares ($2.3M) on February 10, which didn't help sentiment. But 34 analysts still rate the stock Buy with an average target around $119 — implying 55% upside from current levels.
Post-earnings reaction set the tone
Q4 results beat expectations on most metrics, but shares dropped 4-6% in the days following the January 20 release. The market fixated on revenue growth decelerating from 16% in 2025 to the 12-14% range guided for 2026. Paid sharing tailwinds and ad-tier adoption gains are normalizing. That's expected at Netflix's scale, but investors wanted more.
The WBD overhang turned a mild post-earnings dip into a sustained slide. The stock has lost about 30% from mid-2025 peaks and roughly 6.5% in the past week alone.
Where WBD stands
Warner Bros Discovery itself trades around $28, up from 2025 lows near $7.50 but stuck in a holding pattern. The bidding war between Netflix and Paramount is the only thing moving the stock. Analysts have a Moderate Buy consensus with roughly 61% Buy ratings out of 23 covering the name. Short interest has declined, suggesting bears are stepping back.
The creative community is the wildcard nobody's modeling properly. Film professionals and unions opposing the Netflix deal could slow regulatory approvals or force concessions that change the deal economics entirely.
What to watch
The WBD acquisition timeline is everything for Netflix right now. If the deal closes on favorable terms, the stock likely re-rates sharply higher — analysts see $114-119 as fair value even without the deal. If it falls apart or drags into 2027, Netflix still has a $50B+ revenue business growing double digits with expanding margins.
At $79, the market is pricing in significant deal risk on top of a business that just posted its best year ever. Whether that's an opportunity or a trap depends entirely on what happens in Washington and WBD's boardroom over the next few months.
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