Is Now the Time to Buy the Dipped Netflix Stock Amid the WBD Acquisition Drama?

The stock market's reaction to Netflix's (NFLX) proposed $82.7 billion acquisition of Warner Bros. Discovery (WBD) has been nothing short of tumultuous. Since the announcement, Netflix's shares have plummeted nearly 30% from their 2025 highs, sparking a wave of skepticism from analysts and investors alike. The deal, framed as a bold move to consolidate streaming power and expand content libraries, has instead triggered concerns over debt, regulatory hurdles, and execution risks. Yet, for strategic value investors, the question remains: Is this dip an opportunity to buy into a company with long-term growth potential, or a warning sign of overreach?

A Market Reaction Fueled by Skepticism

The immediate fallout from the WBD acquisition announcement was steep. Netflix's stock price dropped sharply, with sell-side analysts from Pivotal Research, Huber Research, and Rosenblatt all downgrading their outlooks. The primary concerns? A staggering $70–$75 billion in added debt, regulatory scrutiny in the U.S. and Europe, and the risk of antitrust challenges. WBD's stock, trading well below the acquisition offer, further muddied the waters, raising doubts about the deal's feasibility.

Yet, not all analysts share the bearish view. Jefferies, for instance, has maintained a "Buy" rating with a $134.00 price target, arguing that the acquisition could eliminate the risk of a prolonged bidding war and position Netflix as a dominant force in global streaming. The firm also highlights that Netflix's trailing P/E ratio of 39x, while elevated, reflects investor confidence in its future earnings growth.

Financial Health: Debt, Leverage, and the Road to Deleveraging

The acquisition's financial implications are stark. Netflix's pro forma net leverage is projected to rise to 3.0x at closing, with $75 billion in total debt. However, management has signaled a clear path to deleveraging, leveraging its anticipated $10+ billion in annual free cash flow to reduce leverage to mid-2x by 2027. Moody's has affirmed Netflix's A3 credit rating, citing its strong operating performance and the strategic value of acquiring WBD's intellectual property.

Critics argue that the debt load could strain Netflix's balance sheet, particularly if integration proves challenging or regulatory hurdles delay the deal. Yet, for value investors, the company's robust revenue growth-up 18% year-over-year-and expanding advertising revenue (now $3.5 billion annually) suggest a resilient business model capable of weathering short-term turbulence.

Valuation Metrics: High Multiples, High Hopes

Netflix's valuation ratios remain a point of contention. As of late 2025, its trailing P/E ratio ranged between 37.84x and 42.4x, while its forward P/E stood at 29.59–38.31. The EV/EBITDA multiple is projected at 29.5x post-merger, a figure that, while high, reflects investor optimism about the combined entity's growth potential.

These multiples are justified, in part, by the acquisition's strategic logic. By absorbing WBD's vast content library and global distribution networks, Netflix aims to accelerate its expansion into international markets and diversify its revenue streams. The deal also positions the company to capitalize on the advertising-driven streaming model, a sector where Netflix has shown significant traction.

Strategic Rationale vs. Execution Risks

The acquisition's success hinges on execution. Netflix's management has emphasized that the deal will be accretive to earnings by year two and generate $2–3 billion in annual cost savings by year three. However, these projections depend on seamless integration, a feat complicated by WBD's sprawling operations and regulatory scrutiny. The $5.8 billion break-up fee underscores the stakes.

For value investors, the key is to differentiate between short-term volatility and long-term potential. While the stock's 18% drop over the past month may seem alarming, it also presents an opportunity to assess whether the market is overcorrecting. Netflix's fundamentals—strong cash flow, growing advertising revenue, and a content library now bolstered by WBD's assets—suggest that the company's intrinsic value may not align with its current price.

Conclusion: A Calculated Bet for Strategic Investors

The WBD acquisition has undoubtedly shaken Netflix's stock, but it has also laid bare the company's ambition and long-term vision. For strategic value investors, the current dip offers a chance to evaluate whether the market is undervaluing Netflix's growth prospects in favor of short-term risks. While regulatory and integration challenges remain, the company's financial resilience, deleveraging roadmap, and strategic rationale for the deal provide a compelling case for cautious optimism.

As always, the answer to "Is now the time to buy?" depends on one's risk tolerance and investment horizon. But for those willing to look beyond the noise, Netflix's stock may yet prove to be a bargain in the making.