Netflix shares have fallen approximately 27% since peaking in late June 2025, marking one of the company’s steepest multi-month declines in recent years. The selloff accelerated after Netflix announced its $72 billion equity acquisition of Warner Bros. Discovery’s studios and streaming division in early December.
The deal immediately rattled markets. On December 5, the day of the announcement, Netflix stock dropped around 3%, while Warner Bros. Discovery shares gained a similar amount. The divergent reaction reflected investor scepticism over Netflix’s expanding balance sheet versus optimism surrounding Warner’s exit.
Selling pressure deepened days later as Paramount Global launched a hostile $108 billion counterbid, complicating the competitive and regulatory landscape and adding uncertainty to Netflix’s acquisition timeline.
Warner Bros.’ deal structure is raising debt and valuation concerns
The acquisition carries an enterprise value of roughly $82.7 billion and requires Netflix to assume a significant portion of Warner Bros. Discovery’s existing debt. Under the agreement, Warner shareholders would receive $23.25 in cash and $4.50 in Netflix stock per share.
Netflix has projected $2 billion to $3 billion in annual cost synergies by the third year following completion. However, many analysts argue that these savings may fall short of justifying the deal’s size at current valuation multiples, particularly given the rising cost of capital and tighter regulatory scrutiny across global media markets.
The deal also includes a $5.8 billion breakup fee, underscoring the financial risk if approvals are delayed or denied.
Regulatory risk pressures Netflix stock outlook
Regulatory uncertainty has become a central factor weighing on Netflix shares. The proposed acquisition is not expected to close before the third quarter of 2026, leaving the company exposed to prolonged review periods in the US and abroad.
Concerns escalated after President Donald Trump publicly questioned the transaction’s antitrust implications, amplifying fears of intervention in a media landscape already facing consolidation fatigue. Analysts warn that extended regulatory delays could strain investor confidence and limit Netflix’s strategic flexibility over the next 18 to 24 months.
Wall Street analysts cut Netflix price targets
Analyst sentiment has shifted sharply since the deal announcement. Rosenblatt Securities downgraded Netflix from Buy to Neutral on December 8, slashing its price target from $152 to $105. Pivotal Research followed with a downgrade to Hold, citing elevated execution risk and an extended period of uncertainty.
On January 5, CFRA reduced its rating from Strong Buy to Hold and lowered its price target to $100, pointing to leverage concerns and limited earnings visibility during the integration phase.
The downgrades reflect a broader reassessment of Netflix’s risk profile rather than doubts about its core streaming business.
Bullish analysts see long-term upside in Warner assets
Despite the pullback, some analysts remain constructive. Canaccord Genuity reiterated its Buy rating, arguing that Warner Bros.’ globally recognized franchises, film studios, and production infrastructure could strengthen Netflix’s content moat over time.
Supporters of the acquisition view it as a strategic pivot that secures long-term access to premium intellectual property at a time when content scarcity and licensing costs are rising across the industry.
Where is the Netflix streaming strategy shifting?
The Warner deal signals a shift in Netflix’s growth strategy from content licensing toward full ownership and vertical integration. With competition intensifying from Disney, Amazon, Apple, and traditional studios, Netflix is betting that scale and proprietary franchises will drive subscriber retention and revenue diversification.
Industry analysts note that while short-term market reaction has been negative, the long-term value of owning a vast studio operation could extend beyond streaming into theatrical releases, licensing, and global syndication.
Is the Netflix stock sell-off overdone?
For now, markets appear focused on downside risk rather than strategic optionality. Netflix stock reflects investor concerns about debt levels, regulatory delays, and integration complexity rather than potential revenue expansion.
Sentiment could shift if Netflix demonstrates progress on regulatory approvals, balance-sheet discipline, and integration planning. Until then, volatility is likely to persist.
Whether the current selloff proves justified or premature will depend on execution, and on whether Netflix can turn one of the largest media acquisitions in history into a sustainable growth engine.
