Netflix Stock Tanks After Earnings: Warning Sign or Should You Ignore?

Core Viewpoint - Netflix's stock has experienced a significant decline, dropping as much as 7% in pre-market trading and approximately 4% on Wednesday, reaching a 52-week low of around $83.40 per share, primarily due to a disappointing outlook for 2026 despite solid Q4 earnings results [1][9]. Financial Performance - In Q4, Netflix reported revenue of $12.05 billion, reflecting an 18% year-over-year increase, surpassing analysts' expectations of $11.97 billion [2]. - Net income for the quarter rose 29% year-over-year to $2.4 billion, equating to $0.56 per share, which also exceeded estimates of $0.55 per share [2]. Future Outlook - The revenue forecast for 2026 is projected to be between $50.7 billion and $51.7 billion, indicating an annual growth rate of 12% to 14%, which is below the 16% growth rate anticipated for 2025 [3]. - Subscriber growth is expected to reach 325 million in 2025, marking an 8% increase; however, this growth rate is lower than that of the previous two years [4]. Acquisition Concerns - Netflix has proposed an all-cash offer of $27.75 per share to acquire Warner Bros. assets, with a total deal value of approximately $82.7 billion, including some Warner Bros. debt [5]. - Investor sentiment has been negatively impacted since the announcement of the acquisition, with Netflix's stock declining about 23%, raising concerns about overpayment and integration risks [6][7]. Regulatory and Approval Challenges - There are uncertainties regarding the approval of the acquisition by Warner Bros. Discovery shareholders, especially in light of a competing offer from Paramount Skydance [8]. - Potential regulatory hurdles and antitrust challenges further complicate the acquisition process, contributing to investor apprehension [8].