Netflix (NFLX) Stock Rallies 17% — Here’s Why Missing Out on Warner Was a Good Thing

TLDR

• Netflix stock is up 17% over the past month after dropping out of the Warner Bros. Discovery bidding war
• Paramount Skydance won the Warner bid but its stock has fallen 16% over the same period on debt concerns
• Netflix is set to receive a $2.8 billion termination fee from Warner and Paramount
• Citi resumed coverage with a Buy rating and a $115 price target, implying 25% upside
• Analysts forecast Netflix will generate $11.4 billion in free cash flow in 2026

Netflix walked away from one of the biggest deals in streaming history — and Wall Street is rewarding it for doing so.

The stock has climbed 17% over the past month, outpacing a broader market that is down 3.7% over the same period. The S&P 500 has been under pressure as investors worry that the Iran war could push inflation higher.

Netflix, Inc., NFLX

Netflix had been in the running to acquire most of Warner Bros. Discovery for $83 billion in cash and stock. The deal would have included Warner’s studios, HBO Max, and the DC franchise. Paramount Skydance ultimately won that bidding war.

Paramount’s stock has dropped 16% over the past month as investors focus on the debt the company is taking on. It will issue $41 billion in new stock and take on $54 billion in new debt to close the Warner deal. Paramount already carries more than $13 billion in long-term debt. On Thursday, its stock closed at its lowest level since August 2009.

Netflix, by contrast, is walking away from the deal in a strong financial position.

Netflix Collects $2.8 Billion Termination Fee

Under the terms of the failed deal, Netflix is owed a $2.8 billion termination fee from Warner and Paramount. That cash lands on top of what is already a healthy cash flow outlook. Analysts are forecasting $11.4 billion in free cash flow for Netflix in 2026.

That cash gives the company room to buy back stock, raise its earnings guidance, or invest in new growth areas. There is growing speculation on Wall Street that buybacks are coming.

Citi resumed coverage of Netflix this week with a Buy rating. Analyst Jason Bazinet set a price target of $115, which implies 25% upside from where the stock closed Thursday. He pointed to potential streaming price hikes, share repurchases, and room to raise full-year EBIT guidance as reasons to own the stock.

The analyst consensus also leans bullish, with a target price of $113.09 — about 20% above current levels. The vast majority of analysts covering the stock rate it a strong buy.

Organic Growth Path Back in Focus

Without the Warner deal on the table, Netflix’s strategy is clearer. The company can now focus on expanding live sports, growing its advertising tier, and building out content that can be monetized beyond streaming.

Analysts expect Netflix’s revenue to grow more than 13% in 2026 without Warner, followed by nearly 12% growth in 2027. That extends a track record of consistent top-line growth.

The stock is still down roughly 10% from when Netflix first announced its interest in Warner, and about 30% below its mid-2025 peak. At Thursday’s close, Netflix traded at $91.76, within a 52-week range of $75.01 to $134.12.

Netflix’s market cap stands at $387 billion. Its gross margin is 48.59%.

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