Why Netflix Stock Is Down 38% From Its All-Time High

Core Viewpoint - Netflix is currently facing significant challenges, including a sharp decline in stock price and intense competition, while navigating a complex acquisition of Warner Bros. [2][8] Financial Performance - Netflix's earnings per share for Q3 was $5.87, missing analysts' expectations by $1.10 or 15.8% [3] - Revenue increased by 17.2% year-over-year to $11.5 billion, but operating margin fell from 34.1% to 28.2% due to a $619 million expense related to a tax dispute in Brazil [4] - The stock is trading at a price-to-earnings ratio of 36.5, below its five-year average of 44.7, but higher than the S&P 500's P/E ratio of 31.3 [5] Competitive Landscape - Netflix's market position is under pressure, ranking third in TV watch time with 8.8%, while YouTube leads with 13.4% [2] - The competition for viewers remains intense, with YouTube maintaining its lead for six consecutive months [2] Acquisition of Warner Bros. - Netflix announced an agreement to acquire Warner Bros. for $82.7 billion, which includes its film and TV studios, catalog, and HBO Max streaming service [8][9] - Investor skepticism surrounds the deal due to its high cost and potential debt implications, with Netflix's stock falling 12% since the announcement [9] - Historical context suggests that corporate mergers, particularly in media, often fail to deliver expected results, raising concerns about the Warner Bros. acquisition [10][11] Future Outlook - Netflix expects the Warner Bros. transaction to close within 12 to 18 months and has adjusted its bid to an all-cash offer of $27.75 per share [13] - Investor caution persists regarding the acquisition's impact on Netflix's finances and the integration of two culturally different media entities [13]