Netflix's stock has retreated by over 35 percent from its June 2025 apex, leaving market participants to weigh how the company will navigate a period of margin uncertainty, evolving viewer behavior and shifting deal dynamics related to Warner Bros. Discovery (WBD).
Analysts at Bernstein observed that Netflix currently trades at about 22 times their 2027 earnings projection, noting that the stock appeared more attractive immediately after the company's fourth-quarter results but that investor sentiment later softened.
Bernstein analyst Laurent Yoon outlined three principal topics at the center of investor debate.
Margin outlook for 2026
Netflix guided to a 32 percent EBIT margin for 2026, a figure Bernstein said arrived well below market expectations. The research team expects Netflix to lift its margin outlook at some point later in the year, but cautioned that the company may need to increase content spending to support growth. Yoon wrote that reaching a mid-30 percent margin in 2026 "may prove ambitious," even while a mid-year revision remains a likely development.
Engagement trends
Bernstein flagged engagement as a persistent concern. The firm said there is "no silver bullet" to reverse changing consumption patterns, and noted that Netflix is responding by broadening its programming mix across both local and global markets to counteract those shifts.
The WBD factor
Perhaps the most consequential variable, according to Bernstein, is Netflix's pursuit of Warner Bros. Discovery. Yoon wrote that WBD's content library "could accelerate PxQ for Netflix," but emphasized that any acquisition would carry a "hefty price tag." The research note stressed that the investment case for Netflix depends heavily on the outcome of the ongoing WBD process, laying out scenarios that range from Netflix winning WBD at its current bid to a rival, PSKY, pursuing a highly levered transaction that would limit competitive risk.
This mix of margin, engagement and deal-related questions frames investor expectations as the company seeks to balance content spending, subscriber engagement and strategic growth options.