Investing.com -- Netflix shares have fallen more than 35 percent from their June 2025 peak, leaving investors questioning what comes next as the company faces a mix of margin uncertainty, engagement challenges and shifting deal dynamics tied to Warner Bros. Discovery.
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Bernstein said Netflix now trades at roughly 22 times its 2027 earnings estimate, noting that the stock “looked even more compelling immediately following the Q4 print” before sentiment softened again.
Bernstein analyst Laurent Yoon said three issues are at the center of the current debate.
The first is 2026 margin expectations. Netflix’s guidance for a 32 percent EBIT margin “came in well below expectations,” and while Bernstein expects the company to raise its margin outlook later this year, the firm also warned that stepping up content spending may be necessary.
Yoon wrote that achieving a mid-30 percent margin in 2026 “may prove ambitious,” even if a mid-year revision remains likely.
The second overhang is engagement. Bernstein believes “there is no silver bullet” to reverse shifting consumption patterns, but Netflix is broadening its programming mix across local and global markets to address the trend.
The third, and potentially most consequential, factor is Netflix’s pursuit of WBD.
Yoon wrote that WBD’s content library “could accelerate PxQ for Netflix,” though the acquisition would come with a “hefty price tag.”
The upside for investors “ultimately hinges on the outcome of the current WBD process,” Bernstein said, outlining scenarios that range from Netflix securing WBD at the current bid to rival PSKY pursuing a highly levered deal that limits competitive risk.
