Netflix shares have been under pressure since late June, with selling intensifying in October after the company emerged as a potential buyer of Warner Bros. Discovery.
Since June 30, Netflix stock has fallen roughly one-third from its peak.
The stock recently hit its lowest intraday level since April, dropping about 2% on Friday, according to GuruFocus.
Despite the decline, Netflix trades at roughly 28 times expected earnings for the next 12 months, higher than streaming rivals Disney, Amazon, and Alphabet, as well as the S&P 500 and Nasdaq 100.
However, this remains below its five-year average multiple of 34.
Investors are focused more on deal uncertainty than Netflix’s day-to-day operations. The stock fell 10% on October 22, its worst single-day drop in over three years, following earnings that raised concerns about future growth.
Attention then shifted to the potential $82.7 billion Warner Bros. acquisition, with shareholders worried about the high cost and Netflix’s lack of experience with large mergers.
Warner Bros. recently rejected a bid from Paramount Skydance, which later confirmed a $30-per-share offer but faces financing challenges, GuruFocus reported. Since June, Netflix has become the fourth-worst performing stock in the Nasdaq 100.
Opinions on Netflix’s valuation remain divided. Some investors see opportunity if the acquisition happens near the current price, while others worry about integration risks and Warner Bros.’ heavy debt.
Christopher Brown of Synovus Securities highlighted Netflix’s price-earnings-to-growth ratio of just over one, noting, “This measure looks more balanced than simple valuation ratios.” He added the stock could rebound to $102.50–$109.70 if Netflix meets or beats fourth-quarter guidance.
Netflix is set to report earnings on Jan. 20, with Wall Street expecting adjusted earnings of 56 cents per share on revenue of $12 billion.
Broader tech sentiment has been boosted by gains at other companies, including Alphabet, which is nearing a $4 trillion market value.
