Netflix shares have been under pressure since late June, with sales intensifying 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 decline, Netflix trades at around 28 times expected earnings for the next 12 months, more than streaming rivals Disney, Amazon and Alphabet, as well as the S&P 500 and Nasdaq 100.
However, this remains lower than its 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, following earnings that raised concerns about future growth.
Attention then shifted to the potential acquisition of Warner Bros. for $82.7 billion, as shareholders worried about the high cost and Netflix’s lack of experience with large-scale mergers.
Warner Bros. recently rejected an offer from Paramount Skydance, which later confirmed a $30 per share offer but is facing financing issues, GuruFocus reported. Since June, Netflix has become the fourth worst-performing stock on the Nasdaq 100.
Opinions on Netflix’s valuation remain divided. Some investors see an opportunity if the acquisition happens at close to the current price, while others are concerned about integration risks and Warner Bros. heavy debt.
Christopher Brown of Synovus Securities highlighted Netflix’s price-to-earnings-to-growth ratio of just over one, noting, “This metric seems more balanced than simple valuation ratios.”
He added that the stock could rebound to between $102.50 and $109.70 if Netflix meets or exceeds fourth-quarter guidance.
Netflix is expected to report earnings on January 20, with Wall Street expecting adjusted earnings of 56 cents per share on revenue of $12 billion.
Overall tech sentiment was boosted by gains by other companies, including Alphabet, whose market value is approaching $4 trillion.
