Netflix’s Landmark Acquisition Faces Market Skepticism and Regulatory Hurdles

In a significant development for the media landscape, Netflix has gained a crucial advantage in the bidding war for Warner Bros. Discovery. The target company's board of directors has formally advised its shareholders to reject a competing hostile takeover bid from Paramount Skydance and to instead support the $82.7 billion offer from the streaming giant. Despite this endorsement, Netflix's stock remains under pressure as investors grapple with unanswered questions regarding the deal's scale, financing, and regulatory approval process.

Netflix's leadership is championing the proposed acquisition as a pivotal move for long-term expansion. The combination would unite Netflix's global subscriber base of over 300 million with Warner Bros. Discovery's vast and iconic content library. This includes major franchises such as Harry Potter, Game of Thrones, The Big Bang Theory, The Sopranos, and the DC Universe.

The company highlights several core advantages:
* Content Expansion: Immediate access to Warner Bros.' deep catalog of film and television titles, built over decades.
* Cost Synergies: Annual savings of at least $2–3 billion are anticipated, beginning in the third year post-acquisition.
* Earnings Accretion: Netflix states the transaction will increase GAAP earnings per share starting in the second year.
* Theatrical Strategy: Warner Bros. films will continue to receive traditional theatrical releases with standard industry windows.

To address antitrust concerns, Netflix points to combined market share in U.S. television viewing time. The merged entity's share would rise only from 8.0% to 9.2%, remaining behind competitors like YouTube (12.9%) and Disney (11.4%).

Board Backing and Competing Offers

The Warner Bros. Discovery (WBD) board issued a strongly worded letter to shareholders, characterizing Paramount Skydance's rival $108.4 billion all-cash offer of $30 per share as "illusory" and inferior. The board accused Paramount of repeatedly misrepresenting the structure of its financing, which relies on the "Lawrence J. Ellison Revocable Trust" rather than a direct, binding commitment from the major shareholder.

Netflix's co-CEO Greg Peters viewed the board's recommendation as a "fairly clear signal" in favor of their proposal. Co-CEO Ted Sarandos emphasized that the agreement with WBD is superior from a shareholder perspective.

The structure of the two offers differs substantially:
* Netflix's Bid: Values WBD at $27.75 per share in a cash-and-stock transaction, comprising $23.25 in cash and $4.50 in Netflix stock per WBD share. The total enterprise value is approximately $82.7 billion.
* Paramount Skydance's Bid: A higher all-cash offer of $30 per share, implying a total enterprise value of $108.4 billion for Warner Bros. Discovery, including assets like CNN and TNT Sports.

Analyst Downgrades Weigh on Share Price

Despite the board's clear recommendation, Netflix's equity has faced pronounced selling pressure since the deal was announced on December 5. Shares closed recently at around $94.33, trading approximately 30% below their 2025 highs—a technical bear market.

Several research firms have responded with downgrades and reduced price targets:
* Pivotal Research: Lowered rating from "Buy" to "Hold," slashing its price target from $160 to $105, citing an expensive deal.
* Huber Research: Double-downgraded from "Overweight" to "Underweight," with a target cut from $137.50 to $92, labeling the situation "very risky."
* Rosenblatt: Moved from "Buy" to "Neutral," reducing its target from $152 to $105 due to an extended period of heightened uncertainty.
* Wolfe Research: Maintained an "Outperform" rating but lowered its target from $139 to $121.

Should investors sell immediately? Or is it worth buying Netflix?

The consensus rating across analysts remains a "Moderate Buy," with an average price target of $130.51, suggesting some firms still see upside potential from current levels despite the risks.

Regulatory Roadblocks and Competitive Resistance

The path to completing the acquisition is complex and lengthy. Co-CEO Greg Peters confirmed that Netflix is already in discussions with the U.S. Department of Justice and the European Commission regarding necessary clearances. Final closure is expected within a 12 to 18-month window.

A key precondition is the planned spin-off of WBD's Global Networks (Discovery Global) division into a separate publicly traded company, scheduled for the third quarter of 2026.

Significant opposition has emerged from competitors and industry groups. Disney CEO Bob Iger criticized the plan, citing concerns over the "pricing power" it would grant Netflix. The Writers Guild of America has called for regulators to block the merger, warning of potential lower wages, job cuts, and reduced content for viewers.

Paramount, meanwhile, remains committed to its own offer. CEO David Ellison stated that his proposal delivers "clearly superior value and higher certainty" for WBD shareholders and intends to continue pursuing the deal.

Forward Timeline: Earnings, Vote, and Valuation

The next major milestone will be Netflix's fourth-quarter 2025 earnings report, scheduled for January 20, 2026. The company has provided guidance for earnings per share of $5.45.

The shareholder vote on the Netflix deal is expected in the spring or early summer of 2026, according to WBD Chairman Samuel Di Piazza. Until then, the stock is likely to remain highly sensitive to new developments in the bidding process and signals from antitrust regulators.

Netflix currently trades at a forward price-to-earnings ratio of approximately 37.4 based on forecasts, notably below recent valuation levels. To finance the cash portion of the transaction, the company is estimated to need roughly $59 billion in new debt. Combined with regulatory risks and the potential for a protracted bidding war, this points to continued high volatility for the shares in the coming quarters.