Netflix Stock Drops 35%+ After Q4 as WBD Deal Risk Rises
Author: Leo Miller. Posted: 1/23/2026.
Quick Look
- 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) just reported its much-anticipated Q4 and full-year 2025 results. The stock closed down roughly 3% on Jan. 21, 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 stock has fallen sharply. Netflix executed a ten-for-one stock split in November, which converted pre-split prices in the $1,100s to the $110s. Overall, shares are down about 37% from their mid-2025 peak.
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The company has given investors plenty to weigh. Growth is expected to moderate, and uncertainty surrounding its Warner Bros. Discovery (NASDAQ: WBD) acquisition has spooked many market participants. The stock now trades at its lowest forward price-to-earnings (P/E) ratio in more than two years.
Given these developments, should investors be cautious, or is this an opportunity to buy the decline?
Netflix Hits Its Marks in Q4, But Signals Growth Slowdown
In the latest quarter, Netflix posted solid results, beating Wall Street forecasts only slightly.
Revenue was $12.05 billion, up 18%, narrowly topping expectations of $11.97 billion. Adjusted earnings per share (EPS) was $0.56, a split-adjusted gain of more than 30% and $0.01 above estimates.
For 2026, Netflix guided to full-year sales of $51.2 billion at the midpoint, implying roughly 13% growth — a deceleration from the company's full-year 2025 growth near 16%. Management also expects free cash flow (FCF) of about $11 billion, or roughly 16% growth.
If FCF grows at or slightly above that rate over many years, it could support the stock's current valuation. But as streaming becomes more competitive and less novel, sustaining high organic growth will likely be challenging.
Accordingly, the company's planned acquisition of Warner Bros. will be a major determinant of Netflix's trajectory, as management looks to convert new assets into higher revenue and profits.
WBD Deal: Big Potential, Big Question Marks
Netflix is pitching the Warner Bros. deal as a growth accelerator. During 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 WBD segments generated about $5.28 billion in revenue and $1 billion in adjusted EBITDA. Adding those businesses could materially boost Netflix's EBITDA (which averaged roughly $3.4 billion over the past four quarters) and, if integrated successfully, could increase engagement and subscriber growth.
But the price tag is steep: the deal is valued at $82.7 billion, and Netflix recently moved to an all-cash offer. That raises the financial burden on Netflix because WBD shareholders would not receive Netflix stock. Netflix also said it would suspend share buybacks to help finance the acquisition, removing a recent EPS tailwind (the firm repurchased nearly $9.2 billion of stock in 2025).
Perhaps the largest unknown: whether the deal will clear regulatory hurdles. The acquisition faces significant antitrust scrutiny, and approval is far from guaranteed. There's also a real chance that Paramount Skydance (NASDAQ: PSKY) could raise its bid above the current $30 per share, potentially leaving Netflix empty-handed.
Analysts See Big Upside, but Uncertainty Remains
The consensus price target for Netflix currently sits near $121, implying upside of roughly 41% from recent levels.
MarketBeat tracked analyst updates following the earnings release; price targets published on Jan. 21 averaged about $117, which still implies strong upside near 38%.
Despite those targets, the market appears cautious — likely due to acquisition uncertainty and questions about future growth. At the same time, the stock's forward P/E near 27x is its lowest since October 2023, suggesting it may be trading at a discount.
If Netflix successfully closes and integrates WBD, the long-term benefits could be substantial, and that potential skews the outlook toward the upside. But the sizable execution and regulatory risks mean investors should weigh both the opportunity and the significant uncertainties before acting.
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