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Netflix Stock Drops 35%+ After Q4 as WBD Deal Risk Rises
By Leo Miller. First Published: 1/23/2026.
Article Highlights
- Netflix shares are in the midst of a huge drawdown that began in the middle of 2025.
- The company's latest earnings didn't provide a respite, sending shares even lower.
- With valuation multiples near an over two-year low, and analysts eyeing upside, is NFLX poised for a big recovery?
Entertainment giant Netflix (NASDAQ: NFLX) recently reported its much-anticipated Q4 and full-year 2025 financial results. The stock closed down about 3% on Jan. 21 in reaction — the latest sign of souring sentiment around the once-favored name.
Since hitting an all-time split-adjusted high near $134 on June 30, 2025, the shares have been on a steep downward trajectory. (Netflix completed a 10-for-1 stock split in November, moving its share price from well over $1,100 to roughly $110.) Overall, shares are down about 37% from their mid-2025 peak.
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See the full story on this opportunity now.The company has given investors a lot to consider. With growth expected to moderate and uncertainty surrounding its Warner Bros. Discovery (NASDAQ: WBD) acquisition, many market participants are cautious. The stock now trades at its lowest forward price-to-earnings (P/E) ratio in more than two years.
Given the circumstances, should investors exercise caution around Netflix — or is this an opportunity to buy after the steep decline?
Netflix Hits Its Marks in Q4, But Signals Growth Slowdown
In the quarter, Netflix posted solid results, though it only narrowly beat Wall Street forecasts.
Revenue came in at $12.05 billion, up 18%, slightly above expectations of $11.97 billion. Adjusted earnings per share (EPS) were $0.56, a split-adjusted increase of more than 30% and $0.01 ahead of estimates.
For 2026, Netflix guided to full-year revenue of $51.2 billion at the midpoint — roughly 13% growth — a notable deceleration from its roughly 16% growth in 2025. The company also expects free cash flow (FCF) of about $11 billion, roughly 16% growth.
If FCF grows near or modestly above that rate for many years, it could help justify the current valuation. However, as streaming becomes more competitive and less novel, sustaining strong organic growth may become increasingly difficult.
Accordingly, Netflix's planned acquisition of Warner Bros. will be a major factor in the company's ability to convert new assets into higher revenue and profits.
WBD Deal: Netflix's Big Splash Still Has Big Question Marks
Netflix is positioning the Warner Bros. transaction as the growth catalyst the company needs. On the earnings call, CEO Ted Sarandos said, "We're working really hard to close the acquisition of Warner Bros. Studios and HBO, which we see as a strategic accelerant."
Last quarter, the relevant WBD segments generated about $5.28 billion in revenue and $1 billion in adjusted EBITDA. Adding those businesses could materially increase Netflix's EBITDA (Netflix averaged roughly $3.4 billion over the last four quarters) and expand content and production capabilities that might boost engagement and subscribers.
But the acquisition comes at a steep price: $82.7 billion. Netflix recently converted its offer to an all-cash bid, which raises the immediate cash burden since WBD shareholders would not receive Netflix stock. Netflix also said it would suspend share buybacks to help finance the deal — removing a meaningful EPS tailwind after repurchasing nearly $9.2 billion of stock in 2025.
Perhaps the largest unknown is whether the acquisition will close. The deal is likely to face intense antitrust scrutiny, and regulatory approval is not assured. There's also a real chance that Paramount Skydance (NASDAQ: PSKY) could raise its offer above the current $30 per share, which might prevent Netflix from securing WBD.
Analysts Eye +35% Gains, But Uncertainty Shrouds NFLX
The consensus price target on Netflix currently sits near $121, implying upside of roughly 41% from current levels.
MarketBeat tracked a wave of analyst updates on Jan. 21 following the earnings release. The price targets published that day averaged about $117, implying roughly 38% upside.
While those targets suggest significant potential, the market appears cautious — likely because of the acquisition uncertainty and questions about future growth. Still, the stock's forward P/E of about 27x is its lowest since October 2023, which could indicate the shares are trading at a relative discount.
If Netflix successfully closes and integrates WBD, the long-term benefits could be meaningful and tilt the outlook for shares to the upside. That said, the combination of deal execution risk, regulatory scrutiny, and a slowing growth profile argues for prudence among investors.
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