TLDR
- NFLX shares declined 1.5% in premarket Wednesday trading following controversy over show creator’s past social media comments
- Elon Musk amplified cancellation calls, criticizing Netflix content aimed at children and urging subscribers to cancel
- Reports emerged that Netflix is exploring acquisition of Warner Bros. Discovery’s film studio and streaming assets
- Bernstein analyst maintains Outperform rating with $1,390 target but questions strategic value of WBD deal
- Stock remains up 34.5% year-to-date despite bearish retail sentiment shift on trading platforms
Netflix stock dropped 1.5% in Wednesday premarket trading as dual storylines captured investor attention. The streaming platform faced mounting pressure from content-related controversy while acquisition speculation swirled around Warner Bros. Discovery assets.
The NFLX ticker surged into Stocktwits‘ top 10 trending equities. Retail sentiment flipped from neutral to bearish overnight. Trading volume reflected heightened interest from individual investors.
Controversy erupted over past social media comments from Hamish Steele, creator of Netflix’s “Dead End: Paranormal Park.” The animated series features LGBTQ+ characters and became a flashpoint for critics following the resurfacing of old posts related to conservative activist Charlie Kirk’s assassination.
Elon Musk amplified the backlash Wednesday morning. He posted “Cancel Netflix for the health of your kids” to his millions of followers. The billionaire shared content criticizing the platform’s children’s programming.
Retail investors responded quickly. Stocktwits users posted bearish comments as sentiment deteriorated. The U.S. government shutdown added to general market negativity.
Warner Bros. Discovery Deal on the Table
Separate reports indicated Netflix is considering a bid for Warner Bros. Discovery’s entertainment assets. The potential deal would focus on film studios and streaming properties rather than acquiring the entire company.
Access to DC Studios, Harry Potter, and HBO Originals would bolster Netflix’s content library. The move could strengthen the platform’s competitive position against rivals.
Bernstein analyst Laurent Yoon called Netflix an “interesting” potential buyer. However, he questioned the strategic rationale behind such a deal.
Yoon noted the industry has seen puzzling transactions before. He cited AT&T/WarnerBros and Amazon/MGM as examples of head-scratching deals.
Limited Growth Potential from Acquisition
The analyst believes a WBD purchase might create short-term engagement gains. But long-term material growth appears unlikely based on platform metrics.
Netflix users already spend roughly 60 minutes daily on the service. This suggests the platform may be approaching capacity for general entertainment consumption.
Subscriber growth opportunities look constrained. Over 90% of HBO Max subscribers already use Netflix in the U.S. market. Strong penetration in developed markets limits expansion potential.
Netflix already maintains industry-leading retention rates. Adding content might reduce churn slightly but upside appears limited.
Cost synergies exist in corporate functions and technology infrastructure. Yoon called these standard efficiencies rather than compelling deal drivers.
Analyst Maintains Bullish Stance
Despite reservations about the WBD acquisition, Yoon maintained his Outperform rating on NFLX stock. His $1,390 price target implies 17% upside from current levels.
Wall Street’s consensus target sits at $1,400.83. Analyst ratings break down to 25 Buys, 10 Holds, and 1 Sell for a Moderate Buy consensus.
Netflix shares have climbed 34.5% year-to-date through Tuesday’s close. The stock faced pressure in Wednesday’s premarket session as controversy and acquisition chatter dominated headlines.
