- 2023 viewing hours per member: roughly flat year-over-year
- 2024 viewing hours per member: still roughly flat despite price hikes
- 2025 projection (pre-deal): analysts expected modest growth
- 2025 projection (post-deal announcement): many now expect further pressure
When your core product is “watch stuff for hours,” and hours aren’t growing, that’s an existential problem dressed in financial clothing.
The Short-Form Monster in the Room
Let’s be honest: most of us feel it in our own lives. You sit down planning to watch a movie, and two hours later you’ve burned through 40 TikToks and three YouTube Shorts rabbit holes instead.
Multiply that behavior by a few billion people and you understand why Netflix is suddenly willing to mortgage its balance sheet for classic studio IP. They need catalog depth that can be chopped into clips, spun into mobile games, turned into TikTok-style “Netflix Bites” shorts, anything to stay in the daily habit loop.
I’ve said it before and I’ll say it again: the next decade of media isn’t about who has the best 10-hour prestige drama. It’s about who owns the 10-second clip you watch while waiting for coffee.
Other Storm Clouds Gathering
Wlodarczak didn’t stop at the deal itself. He laid out a laundry list of additional risks that feel painfully valid:
- Massive future content obligations already on the books (sports rights aren’t cheap)
- Advertising tier launch execution risk, building an entire ad tech stack from near-zero is hard
- Continued reliance on Amazon Web Services, yes, they literally pay a direct competitor billions to host the service
- Net neutrality erosion could eventually let ISPs throttle or charge extra for Netflix traffic
- Foreign exchange headwinds in almost every major market outside the U.S.
Any one of those could be manageable. All of them together, plus a $72 billion deal? That’s how you get a 35%+ haircut on a price target.
Valuation Reality Check
Even before this news, Netflix was trading at roughly 34× forward earnings. Perfectly reasonable if you believe 20%+ subscriber growth returns in 2026–2028. Much less reasonable if growth slows to low-teens while content spend balloons to integrate an entire legacy studio.
Wlodarczak now sees only ~420 million subscribers by 2030 (down from 440 million) and average revenue per user falling to $13 (from $15). Do the math and suddenly $105 starts looking optimistic, not pessimistic.
So… Should You Sell Netflix Stock?
Look, I’m not here to give financial advice, but I’ll share how I’m thinking about it personally.
If you’re a long-term holder who bought below $300, you’re still sitting on life-changing gains. Taking some profits after a 12% YTD move and a headline risk this large feels pretty rational to me.
If you’re thinking about starting a position today? I’d wait. Let the deal structure get clearer, let the regulatory path reveal itself, and see whether engagement actually ticks up after the ad tier scales.
The Netflix story is far from over. They still have the best-in-class retention, a mountain of cash flow, and a brand that’s basically synonymous with streaming. But for the first time in years, the moat looks a little narrower and the wolves a little closer.
Sometimes the biggest deals aren’t signs of strength. Sometimes they’re the corporate equivalent of yelling “I’m fine!” while quietly panicking.
Right now, Wall Street seems to be leaning toward the latter interpretation. Whether they’re right only time, and a lot of very expensive acquisition, will tell.
Have you ever watched a company that looked absolutely bulletproof suddenly make a move that feels… desperate?
That’s exactly the vibe I got yesterday morning when the headlines hit: Netflix is spending a staggering $72 billion to acquire Warner Bros. Discovery’s film studio and streaming operations. Seventy-two billion. On paper it sounds like the ultimate power move in the streaming wars. In reality, at least according to one very influential analyst, it might be the clearest sign yet that Netflix is running scared.
Why a Top Analyst Just Slammed the Brakes on Netflix Stock
Jeffrey Wlodarczak at Pivotal Research Group didn’t mince words. He downgraded Netflix from Buy to Hold and chopped his price target from $160 all the way down to $105. That’s barely a 5% upside from where the stock closed last Friday. For context, Netflix shares are still up about 12% year-to-date, but this call essentially says most of those gains are now baked in, and then some.
His core argument is fascinating, and honestly a little brutal: this gigantic deal is effectively an admission that Netflix’s management sees the writing on the wall for traditional long-form content.
“This expensive deal does partly signal concern from management about trying to combat mediocre subscriber engagement trends.”
Jeffrey Wlodarczak, Pivotal Research Group
In plain English: people’s attention spans are shrinking, short-form platforms are eating everyone’s lunch, and Netflix is willing to pay an astronomical premium to bulk up on library content and studio production capacity in hopes of staying relevant.
The Deal Mechanics Nobody Is Talking About (But Should Be)
First, the timeline. Even in a best-case scenario, regulators aren’t going to wave this through overnight. Wlodarczak estimates 18–24 months to close. That’s an eternity in streaming years. During that period Netflix will be carrying massive due-diligence costs, legal bills, and the constant overhang of “what if it doesn’t get approved?”
Second, the price isn’t actually locked. There’s credible chatter that the Paramount-Skydance merger group could jump in with a counter-bid. If that happens we’re looking at a full-blown auction. Netflix could easily end up paying $80 billion or more by the time the dust settles. Ouch.
And third, integration risk is real. Warner Bros. Discovery’s streaming tech stack is notoriously messy (remember the Max rebranding disaster?). Merging that with Netflix’s famously clean architecture is going to be a multi-year headache.
Subscriber Engagement: The Metric That Keeps Analysts Up at Night
Here’s the part that really stuck with me. Wlodarczak pointed out that even with hits like Stranger Things, Squid Game, and a packed sports slate, average viewing minutes per subscriber have been essentially flat for quarters now.
Let that sink in. The content budget is exploding, the password-sharing crackdown added tens of millions of members, and yet people aren’t actually watching more Netflix. They’re just paying for it (for now).
- 2023 viewing hours per member: roughly flat year-over-year
- 2024 viewing hours per member: still roughly flat despite price hikes
- 2025 projection (pre-deal): analysts expected modest growth
- 2025 projection (post-deal announcement): many now expect further pressure
When your core product is “watch stuff for hours,” and hours aren’t growing, that’s an existential problem dressed in financial clothing.
The Short-Form Monster in the Room
Let’s be honest: most of us feel it in our own lives. You sit down planning to watch a movie, and two hours later you’ve burned through 40 TikToks and three YouTube Shorts rabbit holes instead.
Multiply that behavior by a few billion people and you understand why Netflix is suddenly willing to mortgage its balance sheet for classic studio IP. They need catalog depth that can be chopped into clips, spun into mobile games, turned into TikTok-style “Netflix Bites” shorts, anything to stay in the daily habit loop.
I’ve said it before and I’ll say it again: the next decade of media isn’t about who has the best 10-hour prestige drama. It’s about who owns the 10-second clip you watch while waiting for coffee.
Other Storm Clouds Gathering
Wlodarczak didn’t stop at the deal itself. He laid out a laundry list of additional risks that feel painfully valid:
- Massive future content obligations already on the books (sports rights aren’t cheap)
- Advertising tier launch execution risk, building an entire ad tech stack from near-zero is hard
- Continued reliance on Amazon Web Services, yes, they literally pay a direct competitor billions to host the service
- Net neutrality erosion could eventually let ISPs throttle or charge extra for Netflix traffic
- Foreign exchange headwinds in almost every major market outside the U.S.
Any one of those could be manageable. All of them together, plus a $72 billion deal? That’s how you get a 35%+ haircut on a price target.
Valuation Reality Check
Even before this news, Netflix was trading at roughly 34× forward earnings. Perfectly reasonable if you believe 20%+ subscriber growth returns in 2026–2028. Much less reasonable if growth slows to low-teens while content spend balloons to integrate an entire legacy studio.
Wlodarczak now sees only ~420 million subscribers by 2030 (down from 440 million) and average revenue per user falling to $13 (from $15). Do the math and suddenly $105 starts looking optimistic, not pessimistic.
So… Should You Sell Netflix Stock?
Look, I’m not here to give financial advice, but I’ll share how I’m thinking about it personally.
If you’re a long-term holder who bought below $300, you’re still sitting on life-changing gains. Taking some profits after a 12% YTD move and a headline risk this large feels pretty rational to me.
If you’re thinking about starting a position today? I’d wait. Let the deal structure get clearer, let the regulatory path reveal itself, and see whether engagement actually ticks up after the ad tier scales.
The Netflix story is far from over. They still have the best-in-class retention, a mountain of cash flow, and a brand that’s basically synonymous with streaming. But for the first time in years, the moat looks a little narrower and the wolves a little closer.
Sometimes the biggest deals aren’t signs of strength. Sometimes they’re the corporate equivalent of yelling “I’m fine!” while quietly panicking.
Right now, Wall Street seems to be leaning toward the latter interpretation. Whether they’re right only time, and a lot of very expensive acquisition, will tell.
