- KeyBanc cut its Netflix price target to $110 from $139 but kept an Overweight rating amid uncertainty around a proposed Warner Bros. Discovery acquisition.
- The firm expects 2026 revenue growth near 13% but sees operating margin expansion of ~200 bps, below consensus expectations of 300+ bps, due to integration and cost pressures.
- The roughly $82–83B WBD deal (including assumed debt and largely debt-funded) carries significant regulatory, financing, and integration risks, with added uncertainty from a competing Paramount Skydance bid.
- Street views diverge sharply, with some targets above $140 and bearish calls near or below $100 if deal and margin risks worsen.
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The KeyBanc adjustment reflects heightened concern over the risks embedded in Netflix’s proposed deal to acquire Warner Bros. Discovery’s studio and streaming assets. While the acquisition promises major content and scale advantages, the $82.7 billion enterprise value (inclusive of debt) is substantial, and many Wall Street and regulatory uncertainties accompany it.
Financially, KeyBanc pointed to revenue growth guidance of approximately 13 % year-over-year for 2026 as broadly in-line with expectations, but believes operating margin improvement may miss consensus by about 100 basis points (they anticipate ~200 bps improvement vs. market’s >300 bps projected) due to near-term integration and cost pressures.
Multiple analysts have taken divergent stances. For example, Huber Research lowered its target to $92, citing material downside risk tied to deal execution and regulatory approval. At the same time, other firms, including Canaccord Genuity, remain bullish, setting price targets in the $140-plus range based on content upside, global scale, and long-term synergy potential.
The deal itself presents several explicit strategic implications:
- Regulatory risk: With streaming market share of the combined entity estimated above 40 %, antitrust scrutiny is likely; the deal may require concessions or divestitures.
- Capital structure impact: Netflix expects to fund a significant portion with debt, raising financial leverage. Interim erosion in free cash flow and higher interest expense pose risk until revenue synergies and cost savings are realized.
- Integration complexity: Combining Netflix’s streaming-centric model with traditional studio operations (theatrical releases, TV networks) may challenge culture, operating discipline, and cost discipline.
- Competitive landscape: Paramount’s hostile bid for all of WBD (including cable assets) adds pressure and introduces alternate trajectories for WBD shareholders.
Supporting Notes
- KeyBanc lowered its price target on Netflix to $110 from $139, maintaining an Overweight rating.
- The P/E multiple for Netflix is high, around 36–42× according to recent estimates, raising concerns about overvaluation, especially amid deal financing and margin risks.
- The proposed deal values Warner Bros. at $27.75 per share; Netflix will fund approximately 84 % of the deal via cash and debt, with the rest in stock; WBD’s debt contributes roughly $11 billion to the transaction value.
- Paramount Skydance submitted a competing hostile all-cash bid for WBD, valuing the company at ~$30 per share (≈ $108.4 billion enterprise value) for all assets, including cable and broadcast.
- KeyBanc projects operating margin improvement of ~200 basis points YoY, versus consensus expectations of over 300 bps.
- Huber Research downgraded its rating to Sell and cut price target to $92, citing deal risk and regulatory uncertainty.