Buy Struggling Netflix Stock, Says Analyst. Why Warner Takeover Fears Are Overblown. -- Barrons.com

Dow Jones01-12

By George Glover

Netflix stock has taken a battering since the company said it would buy Warner Bros. Discovery's streaming and studios businesses.

But savvy investors should see the selloff as a buying opportunity, HSBC analyst Mohammed Khallouf said on Monday as he initiated coverage at Buy with a price target of $118. That implies shares can climb 18% from their level as of Friday's close.

The stock is down 13% since Dec. 5, when the company said it would buy Warner Bros. for $27.75 a share, with the cable business being spun out to investors. The S&P 500 is up 1.6% over the same period.

Wall Street is worried Netflix may be overpaying -- particularly given that Paramount Skydance has made a hostile bid of $30 a share for all of Warner Discovery, raising the likelihood of a bidding war for the entertainment company.

Khallouf expects the deal to boost Netflix's earnings per share by between 2% and 4% in 2028 to 2029, if it gets done.

"Yet we see scope for more tangible gains from potential revenue synergies," he wrote, forecasting that Netflix could use Warner's vast library of content to strengthen its offering and drive up subscription numbers by bundling Warner's HBO Max with its own streaming platform.

Buying Warner Bros. is a good way for the streamer to fight back against a saturated domestic market, relatively weak content slate, and the growing popularity of short-form video apps such as TikTok and Alphabet's YouTube TV, Khallouf said. The analyst added that he's expecting Netflix to get a boost from its expansion into "underpenetrated global markets," such as India.

Barron's recommended buying the dip in Netflix last month, forecasting the deal could boost the streamer's profit margin and touting a cheap valuation. Shares currently fetch 28 times expected earnings, a bargain compared with the 43 times multiple at which they were trading in May.

Write to George Glover at george.glover@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

 

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January 12, 2026 08:44 ET (13:44 GMT)

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