The streaming giant’s stock has lost about one-third of its value in the past six months.
- Netflix’s Warner Bros. deal faces pressure as Paramount Skydance, another bidder, is still in the fray.
- Paramount sued Warner Bros. for rejecting its takeover offer and indicated plans to launch a proxy fight.
- At least three analysts have lowered their NFLX price targets ahead of the streamer’s fourth-quarter results next week.
Netflix, Inc. stock drew increased chatter on Stocktwits on Tuesday, amid speculation that it is considering making its $83 billion offer for Warner Bros. Discovery’s studio and streaming assets all-cash.
That came just after Paramount Skydance, another bidder, sued Warner Bros. for rejecting its takeover offer and indicated plans to launch a proxy fight.
The tussle for Warner Bros, home to some of Hollywood’s most celebrated franchises, such as “Harry Potter” and “Game of Thrones,” has been playing out for months. It has pressured Netflix stock for all sorts of reasons, from the viability of the deal to the high loan component of the proposed transaction to the steep termination fee Netflix would have to pay if Paramount succeeds in undoing the Netflix-WBD deal.
Stock Pressure
The streaming giant’s stock has lost roughly one-third of its value over the past six months (down 32% from a lifetime high of $133.91 on Jun. 30), including sharp declines in November and December as Netflix clinched the deal. Analysts have taken note.
Over recent weeks, TD Cowen, Goldman Sachs, and Morgan Stanley have sharply cut their price targets following the share pullback, driving a notable drop in the consensus price target since December after five months of holding steady.
Analysts’ View
TD Cowen, which lowered its NFLX target to $115 from $142, in fact trimmed its view on Netflix’s operating income, EBITDA, and EPS by about 2% each annually from 2025 to 2030 on “slightly higher expense estimates.”
While brokerages broadly maintain a bullish view on the business, the WBD deal has some bearing. Goldman Sachs, which lowered its price target to $112 from $130, said the recent stock performance reflects the company’s focus on the deal rather than core growth.
Analysts, on average, expect Netflix stock to rise 39% to $125.23, according to Koyfin; 29 of 44 recommend ‘Buy’ or higher, while 13 recommend ‘Hold.’
On Stocktwits, retail sentiment for NFLX has swung widely between ‘bullish’ and ‘bearish’ zones over the past three months, with the latest reading being ‘extremely bullish’ as investors take positions ahead of the streamer’s fourth-quarter results next week.
Netflix is expected to report a nearly 17% rise in revenue to $11.9 billion, and a 30% rise in adjusted net profit of $0.55 per share. The expected revenue growth rate is at the higher end of what the streamer posted over the last two years.
Deal Updates
Last month, Netflix said that Warner Bros. has agreed to sell its studio and streaming assets, with the transaction expected to close in 12-18 months. Netflix has reportedly secured $59 billion in debt financing for the deal from banks including Wells Fargo, BNP Paribas, and HSBC Holdings.
In response, Paramount then sweetened its offer, which Warner Bros. rejected last week.
Earlier this week, Paramount sued the company, seeking specific numbers and calculations the board used to rebuff its $30-a-share cash offer in favor of a deal with Netflix. It also plans to nominate directors to the WBD board, a major escalation that signals its intent to pursue the deal aggressively.
Netflix will report Q4 earnings on Jan. 20.
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