Netflix Inc. shares continue to face significant headwinds from Wall Street, with analysts warning the stock remains overvalued despite a sharp selloff linked to its potential acquisition of Warner Bros. Discovery Inc. The streaming giant's stock has plunged approximately 27% since October 2025, when it emerged as a leading contender for the media conglomerate.
Valuation Concerns Prompt Downgrade
Financial research firm CFRA recently downgraded Netflix's stock rating from 'buy' to 'hold', citing heightened concerns surrounding the proposed Warner Bros. deal. The stock is currently trading at around 28 times its expected earnings for the next twelve months. This valuation premium is notable when compared to key rivals and market indices.
For context, Walt Disney Co., Amazon.com Inc., and Alphabet Inc. (owner of YouTube) all trade at lower multiples. The broader S&P 500 and Nasdaq 100 indexes also trade below Netflix's current valuation. Paramount Skydance Corp., another bidder for Warner Bros. which operates Paramount+, trades at less than 13 times forward earnings.
Deal Skepticism Drives Selloff
The primary catalyst for Netflix's recent decline is Wall Street's skepticism about its pursuit of Warner Bros. Discovery, valued at US$82.7 billion. The combination would merge Netflix's dominant streaming platform with Warner Bros.' iconic film and TV studios, HBO Max, and the HBO cable network.
Investors have expressed deep concerns for months, worried about the deal's staggering cost, potential regulatory hurdles, and Netflix's limited history with large-scale mergers. This sentiment triggered a 10% single-day drop on October 22, 2025—the stock's worst day in over three years—following a quarterly report that raised questions about future growth.
"Netflix looks to me like dead dollars for investors for a variety of reasons," said Joel Kulina, managing director for TMT trading at Wedbush Securities. "Even before the Warner Bros. deal, the narrative was pretty uninspiring."
Is Netflix a Bargain or Still Too Rich?
Despite the recent plunge, some perspective is offered by Netflix's historical trading range. Over the past five years, the stock has averaged a price-to-earnings multiple of 34, suggesting its current multiple of 28 could be considered relatively cheap by its own standards. However, this historical context isn't enough to sway many analysts currently.
"Netflix is not a screaming 'buy' at the current price levels," stated Christopher Brown, a financial adviser at Synovus Securities. Brown, who owns Netflix shares personally and whose firm holds them in portfolios, highlighted the prevailing caution on Wall Street.
The stock's performance reflects this doubt. Since hitting a peak on June 30, 2025, Netflix has lost about a third of its value. It is now the fourth-worst performer in the Nasdaq 100 index since the end of June.
The deal landscape shifted recently when Warner Bros. once again rejected a competing offer from Paramount Skydance on Wednesday, January 7, 2026, citing financing as a key issue. Paramount reaffirmed its US$30 per share bid the following day. For now, Netflix appears to hold the leading offer, a position that continues to make investors nervous about prolonged uncertainty.
Analysts are currently expecting Netflix to report adjusted earnings of 56 cents per share on revenue of US$12 billion for the fourth quarter of 2025. The company's lack of explicit financial guidance for 2026 has been an additional overhang on the stock, compounding the anxiety created by the potential mega-merger.
