Netflix dropping its bid for Warner Bros. will spur big gains for the streaming giant, analysts say

Analysts believe Netflix’s decision to walk away from a previously proposed deal for Warner Bros. Discovery removes a major overhang for the stock and allows investors to refocus on the company’s core growth story. On Thursday, Netflix declined to raise its bid to buy Warner Bros. Discovery’s studio and streaming assets to match a revised offer from Paramount Skydance . Paramount raised its bid earlier this week to buy the entirety of Warner Bros.’ assets for $31 per share, up from $30 per share, in an all-cash deal. Shares of Netflix jumped 8% before the bell on Friday, as did Paramount Skydance. Warner Bros. Discovery stock slipped 1%. Netflix’s pop reflected a sigh of relief analysts breathed after the streamer dropped its bid for Warner. Shops across Wall Street said this eliminates a key overhang for the stock, with Jefferies analyst James Heaney writing that Netflix was “walking away to pull ahead.” NFLX WBD,PSKY YTD mountain NFLX/WBD/PSKY YTD chart “With NFLX walking away from WBD, we’re re‑underwriting NFLX’s fundamentals and come away constructive on the organic growth outlook, with engagement fears overblown and healthy subs/ pricing/ads runway,” wrote Heaney. Netflix walking away from the deal also unveils other catalysts, such as the elimination of potential regulatory risks, said Needham’s Laura Martin. Martin added that other tailwinds include lower legal fees, fewer distractions and that $2.8 billion breakup free. “NFLX retains the narrative of disruptor, instead of joining the old-guard Studio biz they overthrew to get here,” she added. “WBD’s fundamentals weakened in 4Q25, yet NFLX would have had to pay more (for less) to meet the PSKY bid for WBD.” Baird analyst Vikram Kesavabhotla believes that this will spur a comeback for shares of Netflix. He was also one of the analysts to explicitly note that he does not see a long-term headwind for Netflix ahead due to the new Warner Bros. Discovery-Paramount Skydance merger. “While the potential transaction between WBD and PSKY (not covered) would alter the competitive landscape, we remain comfortable with NFLX’s ability to navigate these changes successfully and deliver healthy revenue growth and operating margin expansion over time. We remain constructive on the shares and expect tomorrow to be the start of a meaningful recovery in the stock,” the analyst said. However, KeyBanc Capital Markets analyst Justin Patterson said that this also comes with a downside for Netflix. “It is back to original IP creation, and that takes time and money,” he wrote. “The burden shifts back to Netflix to strengthen its original content offering and live events to drive the perceived value of content hours higher.” Bottom line, analysts maintained their long-term bullish stance on Netflix. Here’s how some of Wall Street’s sell-side shops reacted to the news. KeyBanc Capital Markets: overweight rating, $108 price target The bank’s price target implies about 28% upside from Netflix’s Thursday close of $84.59. “We believe Netflix’s decision not to raise its bid for Warner Bros. Discovery eliminates a key overhang, and offers relief to shareholders who were frustrated by the deal. While we are encouraged by the decision not to engage in a bidding war, we believe this also places the burden back on Netflix’s content spend (whether toward originals or live events) to drive viewership and monetization.” Wolfe Research: outperform, $110 Wolfe’s forecast, up from $95, corresponds to upside of 30%. “Backing out of Warner’s auction gives Netflix $2.8B of cash, way less debt, share buybacks, higher ROIC & simpler operations. Investors will eagerly back the growth strategy they know & adore.” Loop Capital: buy, $115 Loop’s target calls for 36% upside going forward. “While management believes the combination would have created shareholder value, been good for U.S. jobs and strengthened the entertainment industry, they said in a statement that the “transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price”. Clearly PSKY feels different. We think this will remove a primary overhang and the stock story will return to ‘business as usual.’” Baird: outperform, $120 Baird’s forecast is 42% above Netflix’s Thursday closing price. “This immediately lifts the primary overhang that has been weighing on NFLX shares … Looking ahead, investors should now have more comfort around the company’s strategy, which we expect to remain consistent with its historical principles. This also clears any potential operational distractions that would have existed during the integration and regulatory review process.” Needham: buy, $120 “We recommend purchase of NFLX shares at current price levels because we expect NFLX to regain the $30-$40/share it lost during its bidding war for WBD.” Jefferies: buy, $134 Jefferies’ price target equates to 58% upside. “We are positive on NFLX walking away from WBD, as our deep dive analysis suggests sustainable 10%+ rev growth and a 20% EPS CAGR through FY30. Both engagement and AI fears are overdone and see potential for accelerated growth and margin expansion in '27 on the back of an additional U.S. px hike (inline vs. historical cadence). We don’t see material L-T pressures from a combined PSKY-WBD.”