Netflix shares have been under pressure since late June, and selling intensified in October after the company emerged as a potential buyer of Warner Bros. Discovery.
Since June 30, Netflix stock has fallen about a third from its peak.
The stock recently hit its lowest intraday level since April, falling about 2% on Friday, according to GuruFocus.
Despite the drop, Netflix trades at about 28 times expected earnings for the next 12 months, higher than streaming rivals Disney, Amazon and Alphabet, as well as the S&P 500 and Nasdaq 100.
However, this is still below the five-year average multiple of 34.
Investors are more focused on deal uncertainty than Netflix’s day-to-day operations. The stock fell 10% on Oct. 22, its worst one-day decline in more than three years, after earnings raised concerns about future growth.
Attention then shifted to the potential $82.7 billion Warner Bros. acquisition, with shareholders worried about the high costs and Netflix’s lack of experience with large mergers.
Warner Bros. recently rejected a bid from Paramount Skydance, which later confirmed an offer of $30 per stock but faces funding challenges, GuruFocus reported. Since June, Netflix has become the fourth worst performing stock in the Nasdaq 100.
Opinions on Netflix’s valuation remain divided. Some investors see opportunities if the acquisition happens near the current price, while others worry about integration risks, and Warner Bros.’ heavy debt.
Christopher Brown of Synovus Securities highlighted Netflix’s price-earnings-to-growth ratio of just over one, noting, “This measure looks more balanced than simple valuation ratios.”
He added that the stock could rise to $102.50-$109.70 if Netflix meets or beats fourth-quarter guidance.
Netflix is set to report earnings on Jan. 20, with Wall Street expecting adjusted earnings of 56 cents per share on revenue of $12 billion.
Broader tech sentiment has been boosted by gains at other companies, including Alphabet, which is approaching a $4 trillion market cap.
