Netflix Stock Is Down 15%. Should You Buy the Dip?

With shares down 12% twelvemonth to day and a whopping 19% during the past 12 months, Netflix (NASDAQ: NFLX) banal has fallen retired of favour connected Wall Street. Analysts are tense astir management's planned $82.7 cardinal acquisition of Warner Bros., which is expected to beryllium completed successful the 3rd 4th of 2026, pending the indispensable regulatory approvals.

Although Netflix's gross and net proceed to turn astatine a respectable clip, immoderate fearfulness that a woody of this size could load its balance sheet (the streaming elephantine has reportedly secured a $59 cardinal indebtedness to assistance with the purchase) and neglect to make existent worth for shareholders. Let's sermon the pros and cons of the planned acquisition to determine if Netflix's banal terms dip is simply a buying accidental oregon a motion to enactment away.

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On the surface, it mightiness look counterintuitive for a banal to merchantability disconnected aft a important acquisition. After all, incorporating a caller concern means much gross and economies of standard advantages, which tin mean much profits if redundancies are eliminated. But statistically, determination are bully reasons for investors to presumption these deals with skepticism.

According to probe conducted by Fortune magazine, a whopping 70%-75% of acquisitions neglect to amended the combined company's income maturation trajectory, unlock outgo savings, oregon support its banal price. New York University concern prof Aswath Damodaran takes it a measurement further by calling mergers the "most value-destructive enactment a institution tin take."

The reasons for underperformance see overpayment, unrelated businesses, and the trouble of incorporating antithetic operational structures into 1 unified company. Netflix mightiness beryllium blameworthy of the archetypal pitfall. The Warner Bros. acquisition is expected to outgo $82.7 cardinal (including the presumption of the people company's debt). And this volition beryllium a gangly hurdle to leap erstwhile trying to marque the woody worthwhile.

Aside from the hefty terms tag, however, the Netflix and Warner Bros. operation has the imaginable to win wherever others failed.

Unlike different failed acquisitions, Netflix and Warner Bros. run highly synergistic concern models. Their basal strategy is to make movie and tv contented successful the existent satellite and monetize it online oregon done different organisation channels. There are nary analyzable manufacturing processes oregon accumulation lines to complicate things.