Netflix Shares Face Headwinds Ahead of Earnings Report

The upcoming week is poised to be pivotal for the streaming giant, Netflix. As the company prepares to release its quarterly results, investor sentiment is being pulled in opposite directions by a major content deal and a significant analyst downgrade. The central question for shareholders is whether the strategic potential of a massive acquisition outweighs immediate operational pressures.

All eyes are on Tuesday, January 20, when Netflix is scheduled to report earnings after the US market closes. Market consensus points to revenue approaching $12 billion, with earnings per share anticipated to be $0.55. Beyond these figures, the company's guidance for 2026 and any details regarding the potential integration of Warner Bros. Discovery (WBD) will be critical for investors. With US markets closed on Monday for Martin Luther King Jr. Day, trading activity in the coming sessions is expected to be decisive for market positioning.

The stock has demonstrated recent sensitivity, currently trading around $88—a level substantially below its 52-week high of over $134. Since the start of the year, the equity has declined by approximately six percent.

Analyst Downgrade Dampens Mood

Adding uncertainty just before the earnings release, the analysis firm Wedbush Securities issued a notable revision on Wednesday. While maintaining an "Outperform" rating on the stock, the firm's experts slashed their price target by 18%, from $140 to $115. Analyst Alicia Reese cited uncertainty surrounding the proposed $72 billion acquisition of Warner Bros. Discovery as the primary reason.

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

This cautious stance is further supported by several fundamental factors:
* The company's third-quarter results fell short of Wall Street's expectations.
* Margins were pressured by tax-related charges in Brazil totaling $619 million.
* Valuation multiples across the streaming sector are currently undergoing a market-wide reassessment.

Despite these concerns, Wedbush views Netflix's advertising business as "significantly undervalued," pointing to improved targeting capabilities as a future growth driver.

Strategic Moves and Acquisition Dynamics

In a counterbalance to the analyst skepticism, Netflix announced a key strategic victory on Thursday. A new global licensing agreement with Sony Pictures grants the service exclusive streaming rights to theatrical films following their home entertainment window. Beginning in late 2026, major franchises like "Spider-Man" and planned "Beatles" films will enter the streaming leader's portfolio.

Concurrently, Netflix's management is advancing its pursuit of Warner Bros. Discovery. Reports indicate the company plans to convert its initial offer into an all-cash proposal. This maneuver is intended to accelerate the regulatory approval process and could enable a shareholder vote as early as February or March. The objective is to outbid a competing $108 billion offer from Paramount Skydance.