CFRA flags risks as Netflix is downgraded on WBD deal concerns

Investing.com -- CFRA said in a note Monday that the outlook for Netflix has become more uncertain, with the firm downgrading the stock to Hold from Buy, citing rising risks tied to the company’s pursuit of Warner Bros. Discovery.

Analyst Kenneth Leon writes that CFRA has cut its 12-month target price by $30 to $100 “to reflect a narrower equity risk premium given the risks of acquiring Warner Bros. Discovery … that will mean taking on significant debt to finance the deal.”

Warner Bros. Discovery’s board has already approved Netflix as the preferred acquirer over Paramount Skydance, but CFRA warns that Netflix “faces risk that a bidding war may take the company to even higher debt financing to consummate the purchase.”

CFRA now takes a more conservative valuation approach, which assumes “a 25.4x TEV/EBITDA multiple compared to the three-year historical average of 29.9x.”

The deal, if completed, could take as long as two years to close. CFRA notes that “the overhang of closing the WBD deal may take 18–24 months with regulatory approvals and possible changes to the deal terms.”

“We think both U.S. and EU regulators may require that NFLX spin-off the HBO Max streaming business held by WBD,” said Leon.

“We may not know the outcome of this risk for some time, and perhaps not even in 2026. NFLX would likely have to sell off media assets like cable TV networks to reduce debt taken on to acquire WBD,” concluded CFRA.

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