The battle for Warner Bros. Discovery (WBD) is heating up, and analyst Gary Black thinks Netflix Inc. (NFLX) is still going to come out on top. Despite Paramount Skydance (PSKY) throwing a wrench into the works with a higher bid, Black argues that Netflix's strategic advantages should carry the day.
Here's the interesting twist: even if Netflix loses this fight, Black thinks the stock could rally back to $100 anyway. That's the level Netflix was trading at on December 5, the day it agreed to acquire Warner Bros.' studio assets and HBO Max for $27.75 per share. The logic? Once the uncertainty around this messy bidding war clears up, investors might breathe easier regardless of the outcome.
The drama escalated Tuesday when Warner Bros. rejected Paramount's latest hostile takeover attempt but gave the company until February 23 to submit its "best and final offer." Paramount has informally floated a higher bid of $31 per share, which apparently caught the Warner Bros. board's attention. Under the merger agreement terms, Netflix has the right to match any competing offer.
Why Netflix Shares Are Getting Hammered
This bidding war hasn't been kind to Netflix shareholders. The stock hit a new 52-week low of $75.23 on February 12, and the selling pressure picked up steam after activist investor Ancora Holdings revealed a $200 million stake in Warner Bros. Discovery. Ancora made it clear they oppose Netflix's $82.7 billion takeover bid and prefer Paramount's competing $30-per-share offer instead.
Then there's the regulatory headache. The Justice Department reportedly launched an investigation into potential anticompetitive practices, issuing a civil subpoena to examine whether Netflix engaged in exclusionary conduct to maintain monopoly power. That's the kind of news that makes investors nervous, regardless of how the takeover battle shakes out.
The technical picture for Netflix isn't pretty either. The stock shows weak price trends across short, medium, and long-term timeframes. Its momentum ranking sits at just the 7th percentile, though its quality ranking is more respectable at the 78th percentile.
NFLX Price Action: Netflix shares are down 15.34% year-to-date. On Tuesday, the stock closed 0.21% higher at $77.03.
