Netflix (NFLX) Stock Gains 9% after Dropping the WBD Deal — Here’s Why Investors Approved

2026-02-27 06:01:21

Netflix NFLX +2.29% ▲ surprised the market by withdrawing its bid to acquire Warner Bros. Discovery WBD -0.35% ▼ . Instead of falling, the stock jumped about 9% in after-hours trading. At first glance, the reaction looks unusual. Companies normally benefit from winning a major asset. However, in this case, investors were relieved the deal did not go through.

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The main issue was valuation. Warner Bros. Discovery had become far more expensive after Paramount Skydance PSKY +10.04% ▲ entered the bidding war with a higher offer.

Why the WBD Deal Became Too Expensive

WBD’s board determined that Paramount Skydance’s proposal offered shareholders better value than Netflix’s earlier agreement. Rather than raising its bid, Netflix chose not to match the new price.

Management said the revised terms were no longer financially attractive. The deal could have increased Netflix’s debt levels, put pressure on profit margins, required a complicated integration process, and triggered regulatory delays.

Netflix currently generates strong free cash flow from its focused streaming model. A large merger could have disrupted that stability for several years.

By walking away, Netflix signaled it would not overpay for expansion. Investors often reward companies that protect profitability instead of pursuing growth at any cost.

What Paramount Skydance Is Offering

Paramount Skydance’s proposal is not just about valuation. The structure of the offer also reduces risk for WBD shareholders.

The bid includes:

Cash Purchase Price: About $31 per WBD share, higher than the prior offer.
Delay Protection: A quarterly payment to shareholders if the deal closing is delayed beyond September 2026.
Regulatory Safeguard: A large termination fee if regulators block the merger, plus coverage of WBD’s breakup fee owed to Netflix.
Financial Support: Additional equity backing tied to Larry Ellison-related funding commitments.
Full Acquisition: Unlike Netflix, which mainly sought the studios and HBO business, Paramount Skydance plans to acquire the entire company, including cable networks such as CNN and Discovery.

Because of these protections, WBD’s board considered the proposal superior.

NFLX Refocuses on the Core Business

After ending negotiations, Netflix emphasized its existing plan. The company intends to continue investing heavily in original content and is expected to spend about $20 billion this year on films and series. It also plans to resume share buybacks.

That message reassured shareholders. Instead of managing a complicated merger, Netflix will focus on subscriber growth, advertising expansion, and content production.

Is Netflix a Good Stock to Buy Now?

Turning to Wall Street, NFLX stock has a Moderate Buy consensus rating based on 27 Buys, nine Holds, and one Sell assigned in the last three months. At $113.88, the average Netflix stock price target implies a 34.63% upside potential.

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