The best way to Play the Inventory for 2026

It has been a rollercoaster trip for Netflix (NFLX) traders this 12 months. The inventory was thought of a bastion of security and a defensive play amid the tariff battle earlier within the 12 months and was outperforming tech friends by a large margin within the first 4 months. Then got here the interval of consolidation, and the inventory traded flat for the following few months.

As financial and tariff worries receded, traders pivoted to different tech names, ditching Netflix. Nevertheless, the worst was but to come back for the streaming large, and it crashed following its Q3 2025 earnings. Netflix noticed some traction following the inventory cut up—the previous rulebook of shares rising after the cut up announcement nearly invariably holds—however quickly got here underneath promoting strain after the corporate introduced that it could purchase Warner Bros. (WBD) following the separation of Discovery World.

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The deal, valued at an enterprise worth of $82.7 billion, is the most important in Netflix’s historical past, and based on the corporate, it could mix “Netflix’s innovation, world attain and best-in-class streaming service with Warner Bros.’ century-long legacy of world-class storytelling.” The deal received’t undergo simply, although, and Paramount (PSKY) has made a counteroffer of $30 per share in money, which is increased than the $27.75 that Netflix supplied within the money and inventory transaction.

Even when Netflix can win over help from WBD shareholders, the deal is ready to face regulatory scrutiny given the dimensions of the transaction. Bob Iger, CEO of rival streamer Disney (DIS), has expressed issues over the deal, citing the alleged pricing energy it could give to Netflix.

In the meantime, NFLX shares have moved southward amid all of the drama over the WBD acquisition and at the moment are up simply round 6% for the 12 months. Not to mention outperforming the S&P 500 Index ($SPX), the inventory is now trailing its returns by a large margin and is in bear market territory after falling nearly 30% from its 2025 highs.

Netflix’s proposed acquisition of WBD wasn’t obtained nicely by sell-side analysts, and at the very least three have downgraded the inventory. Right here’s a short rundown:

Pivotal Analysis, which had a $160 goal worth on Netflix, downgraded the inventory from a “Purchase” to “Maintain,” calling the deal to purchase WBD “costly.” The brokerage—which had a Road-high goal worth on NFLX for a lot of this 12 months—lowered its goal worth to $105.
Huber Analysis double-downgraded Netflix inventory from an “Obese” to “Underweight” whereas slashing its goal worth from $137.50 to $92, with analyst Craig Huber terming the deal “very dangerous.”
Rosenblatt downgraded Netflix from a “Purchase” to “Impartial” whereas slashing its goal worth from $152 to $105. Analyst Barton Crockett sees “an prolonged interval of uncertainty and dangers” for Netflix and assigned a “extra cautious a number of” to NFLX shares.
Bernstein and Wolfe lowered Netflix’s goal worth following the WBD deal whereas sustaining their respective scores.

In the meantime, Netflix sees the WBD acquisition as a driver of long-term progress and price financial savings. The administration sees the deal being accretive to its GAAP earnings by the second 12 months after the deal’s closure and expects it to assist it minimize prices by “at the very least $2-$3 billion” by the third 12 months.

What’s implied in Netflix’s feedback on the acquisition is that the deal can be EPS dilutive within the preliminary few quarters after the shut. Furthermore, for the reason that bulk of the consideration can be in money, Netflix would want to boost loads of debt to fund the transaction. Markets have been involved concerning the influence of upper debt, as Netflix in any other case has a powerful stability sheet with a web debt of simply round $5.2 billion on the finish of September.

Netflix’s valuations have plummeted amid the current fall, and it trades at a ahead price-to-earnings (P/E) a number of of 37.4x. The multiples would have regarded fairly tempting if not for the issues over the WBD acquisition, together with a attainable bidding battle.

All mentioned, I imagine the worst is over for NFLX after the sharp fall from the height, and the inventory stays among the many greatest methods to play the streaming business. The corporate has a number of progress drivers like advert gross sales, reside occasions, sports activities, and merchandise gross sales, which might hold its high line and backside line in fine condition within the coming years.

General, I see Netflix’s risk-reward as fairly balanced right here and keep invested. I used the dip so as to add to my current positions and see the inventory going increased over the medium time period because the drama over the WBD acquisition settles down.

On the date of publication, Mohit Oberoi had a place in: NFLX, DIS. All data and information on this article is solely for informational functions. This text was initially revealed on Barchart.com