Netflix shares fall amid concerns over Warner Bros. takeover

Netflix shares have been under pressure since late June, with selling intensifying in October after the company emerged as a potential buyer of Warner Bros. Discovery.

Since June 30, Netflix stock has fallen about a third from its peak.

The stock recently hit its lowest intraday level since April, falling about 2% on Friday, according to GuruFocus.

Despite the decline, Netflix trades at about 28 times expected earnings for the next 12 months, higher than streaming rivals Disney, Amazon and Alphabet, as well as the S&P 500 and Nasdaq 100.

However, this remains below the five-year average multiple of 34.

Investors are more focused on trading uncertainty than Netflix’s day-to-day operations. The stock fell 10% on Oct. 22, its worst one-day drop in three years, after gains fueled concerns about future growth.

Attention then turned to the potential acquisition of Warner Bros. $82.7 billion, with shareholders worried about Netflix’s high costs and lack of experience in major mergers.

Warner Bros. recently rejected an offer from Paramount Skydance, which later confirmed a $30-a-share offer, but is facing financing challenges, GuruFocus reported. Since June, Netflix has become the fourth-worst performing stock on the Nasdaq 100.

Opinions on Netflix’s valuation remain divided. Some investors see opportunities if the acquisition closes at the current price, while others worry about completion risks and Warner Bros.’ heavy debt.

Christopher Brown of Synovus Securities highlighted Netflix’s price-earnings-to-growth ratio of just above one, noting, “This measure looks more balanced than simple valuation metrics.”

He added that the stock could recover to $102.50–$109.70 if Netflix meets or exceeds guidance for the fourth quarter.

Netflix is ​​set to report earnings on Jan. 20, with Wall Street expecting adjusted earnings of 56 cents per share on revenue of $12 billion.

The broader tech sentiment was boosted by gains at other companies, including Alphabet, which is approaching a market value of $4 trillion.