"Dead Dollars": Netflix stock is down 27% in three months. Is it worth buying?
Since the last record set in June, quotations have fallen by a third
Shares of video service Netflix have lost 27% in less than three months due to a price war over the Warner Bros. studio the streaming service claims to own. Despite that, the securities still look overpriced, Bloomberg notes. And while the consensus view among analysts suggests a buy advice, individually they share their doubts.
Details
Netflix shares have fallen 27% since October, when the streaming giant became one of the top contenders for Warner Bros. Studios. Discovery, but remain a relatively expensive stock, Bloomberg wrote. The ratio of share price to projected earnings over the next 12 months (P/E ratio) is now 28 - higher than rival video-streaming owners Walt Disney and Amazon, as well as Alphabet, which owns YouTube, the agency noted. Paramount Skydance, which also claims Warner Bros. Discovery, that figure is less than 13.
At the same time, Netflix is trading pretty cheap right now compared to its usual level: the average P/E over the past five years for it is 34, Bloomberg noted.
"Netflix is not an obvious buy target at the current price level," Synovus Securities financial adviser Christopher Brown told Bloomberg. He himself owns securities in the company, as does Synovus.
A Netflix spokesperson declined to comment to Bloomberg.
What's weighing on stocks
Netflix shares last hit a record high on June 30, 2025, but have since fallen by about a third and have become one of the weakest in the Nasdaq 100 index over that period. Trading on Oct. 10 was the worst for the stock in more than three years: it then collapsed 10% after reporting that caused investors to worry about its growth prospects. Now, Netflix shareholders are skeptical about buying Warner Bros. Discovery because of its cost, a likely standoff with regulators and doubts about the success of the combined company, given Netflix's little experience in big mergers, Bloomberg writes.
"Netflix, in my opinion, looks like dead dollars to investors for a number of reasons. Even before the Warner Bros. deal, the situation was less than inspiring. The lack of a pronounced outlook for 2026 has been hanging over the stock since [the release of] the latest results," said Joel Kulina, managing director of TMT trading at Wedbush Securities. The Warner Bros. deal will dampen investor enthusiasm for Netflix for months to come: it has become too complicated, and investors in tech companies are not known for their patience, he said.
On Monday, January 5, CFRA analyst Kenneth Leon downgraded shares of Netflix to Hold from a Hold recommendation. Among the reasons Leon cited were precisely the concerns surrounding the deal. "Acquisitions have not been part of Netflix's strategy for decades, and Warner Bros.'s high debt presents risks," the analyst said.
On the other hand, Riverpark Capital portfolio manager Conrad van Tinhoven sees Netflix's stock, on the contrary, as attractive - should the deal be finalized, Bloomberg reports. "If they buy [Warner Bros. Discovery] assets with the current offer or close to it, I will buy the stock," van Tinhoven noted.
What is the consensus
The most popular analyst recommendation is to buy Netflix shares: they have 26 Buy ratings and five Overweight ("above market"), MarketWatch shows. At the same time, 13 analysts recommend holding (Hold) and three recommend selling (two Sell and one Underweight).
The stock has an average target price of $128.7, which implies a 42% upside from the stock's closing price of $90.53 on January 8.
This article was AI-translated and verified by a human editor
