Netflix Stock Plunges 33% on Warner Bros. Deal Fears, But Analysts See a Buying Opportunity

Streaming Giant's Bold Move Sparks Market Jitters, But Bulls See Value Emerging

Netflix (NASDAQ: NFLX), the streaming pioneer that staged a spectacular 631% rally from its 2022 lows, is facing a sharp reality check. The stock has plummeted more than 33% from its mid-2025 peak, with the decline accelerating after the company confirmed it was in talks to acquire Warner Bros. Discovery's (NASDAQ: WBD) studio and HBO assets for a staggering $72 billion in cash.

The proposed deal has Wall Street deeply divided. Critics argue that taking on such a massive debt load—for a content library and a legacy business posting annual losses since 2022—could cripple Netflix's pristine balance sheet and sterling cash flow for years. The company, currently valued at $350 billion, is also in a bidding war with Paramount Skydance for the assets, adding another layer of uncertainty.

Yet, in the wake of the steep sell-off, a contrarian narrative is gaining traction. Two analyst firms have recently shifted their stance. Freedom Capital Markets upgraded Netflix from Hold to Buy on January 27, 2026, setting a price target of $104. A day earlier, Phillip Securities moved its rating from Sell to Accumulate, with a $100 target.

The Bull Case: Fundamentals Remain Robust

The upgrade rationale hinges on Netflix's core operational strength. The company's crackdown on password sharing and a sharp focus on profitability have paid off handsomely. Q4 2025 revenue hit $12.05 billion, surpassing estimates, with sales growth at 17.6% and net income soaring 29%. The advertising segment is on track to double its sales to $3 billion this year.

While its Q1 2026 guidance for 15% earnings and revenue growth slightly disappointed the street, bulls point out that Netflix has consistently outperformed its own forecasts in recent years. Analysts project EPS to grow over 23% this year and 22% in 2027, with revenue growth holding in the double digits.

"The market is throwing the baby out with the bathwater," says David Chen, a portfolio manager at Horizon Growth Advisors. "You're now looking at a stock trading around 26 times forward earnings—a level we haven't seen since late 2023 and almost half its multiple from last summer. For a company with nearly 30% operating margins and this growth profile, that's a compelling entry point."

The financial transformation is stark. Netflix has turned its cash flow from a $3.14 billion burn in 2019 to a $9.46 billion generation in 2025. Even if the Warner Bros. deal proceeds, proponents argue the company's robust profitability provides a buffer. With existing debt causing manageable interest costs, there is, in their view, room to finance a strategic acquisition.

Skepticism Runs Deep on Deal Logic

Not everyone is convinced. The deal's sheer size and the target's financial health are major red flags for many.

"This is a monumental misstep," argues Sarah Gibson, a sharp-tongued independent market analyst and vocal Netflix skeptic. "It's corporate empire-building at its worst. Netflix is considering levering up to buy a sinking ship loaded with its own debt, all to chase a content arms race it was already winning. This isn't strategic; it's desperate, and shareholders are right to flee."

Other observers take a more measured, wait-and-see approach. Michael Rodriguez, a veteran media investor, notes, "The emotional sell-off may have overshot. The core subscription and ad businesses are undeniably strong. If Paramount wins the bid, Netflix stock could rally on pure relief. If Netflix wins, the execution risk is enormous, but the content arsenal would be unrivaled. It's a binary bet now."

For retail investors watching the drama unfold, Lisa Park, a financial advisor, offers this perspective: "Moments like these separate reactive trading from disciplined investing. Netflix's price drop reflects a new, tangible risk. But it also prices the stock at a level that discounts a lot of that fear. For long-term believers in the streaming model, doing your homework now could pay off."

The consensus among bullish analysts is that based on EPS growth alone, the stock could see 40-50% upside in the next two years, even on a conservative earnings multiple expansion. With the forward premium already compressed, they argue the risk-reward balance has shifted, making Netflix's dip a potential buying opportunity for those willing to stomach the headline volatility.