Is Netflix's 32% Stock Decline a Strategic Buying Opportunity for Long-Term Investors?

The recent 32% plunge in Netflix's stock price has sparked intense debate among investors. While short-term volatility is often a function of market sentiment, the broader question for long-term investors is whether this decline reflects a mispricing of the company's fundamentals or a recalibration of expectations around its ambitious $82.7 billion acquisition of Warner Bros. Discovery (WBD). To assess this, we must dissect Netflix's valuation, growth trajectory, and the risks inherent in its strategic pivot.

Valuation: A Premium with Room for Adjustment

Netflix's current valuation appears elevated relative to its peers but remains anchored to its growth potential. The company trades at a forward price-to-earnings (P/E) ratio of 31.8 times, significantly above the 25.77 industry average for the Zacks Broadcast Radio and Television sector according to Nasdaq analysis. However, this premium is not without justification: Netflix's revenue growth of 15.4% in 2025 outpaces tech giants like Apple (6.0%) and Amazon (10.9%) as reported by Trefis. Its price-to-earnings-to-growth (PEG) ratio of 1.28, calculated by dividing its P/E of 45.56 by a 35.59% earnings-per-share (EPS) growth rate, suggests the stock is trading at a slight premium to its earnings momentum according to FinanceCharts.

Critics argue that the PEG ratio has worsened by 12.97% compared to its 12-month average, reflecting investor skepticism about sustaining this growth as FinanceCharts data shows. Yet, Wall Street's consensus projects 2026 EPS of $3.23, implying a forward P/E of 28.1 if the stock price stabilizes according to Nasdaq reporting. This suggests that, even at current levels, Netflix's valuation could still be justified if its earnings growth meets expectations.

Growth Momentum: Content, Advertising, and Global Expansion

Netflix's growth story remains robust, driven by three pillars: content diversification, advertising revenue, and international expansion. The company's third-quarter 2025 revenue of $11.51 billion-a 17% year-over-year increase-highlights its pricing power and expanding subscriber base as Yahoo Finance reports. Its advertising business, now a critical growth driver, is on track to generate $2.9 billion in 2025, more than double its 2024 performance according to the same report.

The proposed WBD acquisition could amplify these trends. By integrating WBD's iconic franchises (e.g., Harry Potter, Game of Thrones) and theatrical capabilities, Netflix aims to diversify into gaming, immersive experiences, and direct-to-streaming content as The Motley Fool notes. Analysts project $2–3 billion in annual cost savings by the third year post-closing, with EPS accretion by year two according to Nasdaq analysis. However, these synergies hinge on successful integration-a process complicated by cultural differences between Netflix's data-driven model and WBD's Hollywood-centric approach as Truth on the Market observes.

Acquisition Risks: Regulatory Hurdles and Financial Burden

The WBD acquisition introduces significant risks that could derail Netflix's long-term value creation. Regulatory scrutiny is a primary concern: the combined entity would control 45% of the global streaming market, surpassing the 30% threshold that typically triggers antitrust alarms according to Competition on the Merits. Critics warn that reduced competition could lead to higher streaming prices and undermine the theatrical release model as Stanford News reports. The U.S. Department of Justice and European regulators are expected to scrutinize the merger for potential harm to consumers and content creators as Forbes notes.

Financially, the deal is largely debt-financed, increasing Netflix's leverage at a time of persistently high interest rates. This raises the risk of rating downgrades and higher borrowing costs according to Credit Sights. While the acquisition could generate $2–3 billion in annual savings, these benefits may take years to materialize, leaving the company vulnerable to short-term debt servicing pressures.

Balancing the Equation: Strategic Opportunity or Overreach?

For long-term investors, the key question is whether Netflix's strategic ambitions justify the current valuation. The stock's 32% decline since October 2025-driven by acquisition-related uncertainty-has created a discount relative to its historical P/E of 44.8 as The Motley Fool reports. If the WBD deal is approved and integrated successfully, Netflix could emerge as a dominant media conglomerate with unparalleled content libraries and advertising capabilities.

However, the path is fraught with execution risks. Regulatory rejection, integration challenges, or suboptimal cost savings could erode shareholder value. Investors must also consider that Netflix's operating margin of 29.1%, while strong, trails Apple's 31.9% according to Trefis comparison, suggesting there is room for improvement in profitability.

Conclusion: A Calculated Bet for the Patient Investor

Netflix's stock decline presents a compelling case for long-term investors who are comfortable with strategic uncertainty. The company's valuation, while elevated, is supported by robust revenue growth and a transformative acquisition that could redefine its role in the media landscape. Yet, the risks-regulatory, financial, and operational-cannot be ignored.

For those with a multi-year horizon, the current price may represent an opportunity to acquire a high-growth asset at a discount, provided they are prepared to weather near-term volatility. However, the decision should be tempered by a realistic assessment of the WBD acquisition's execution risks and the broader macroeconomic environment. In the end, Netflix's success will depend not just on the scale of its ambitions, but on its ability to execute them with precision.