Netflix Issues Cautious Forecast Amid WBD Saga

Summary

John Belton of Gabelli Funds discusses Netflix's fourth-quarter earnings and the market's sell-the-news reaction. He sees top-line and subscriber trends as healthy but margin guidance as disappointing, likely causing slight negative estimate revisions. He remains positive on Netflix's multiyear story after its derating, citing advertising revenue growth, potential fundamentals stabilization, and optionality from a Warner Bros. Discovery deal, while cautioning investors to be patient.

• Netflix reported over 325 million subscribers and solid 2025 member growth.
• Margin guidance of 31.5%, or about 32% excluding acquisition costs, disappointed and may lead to negative estimate revisions.
• Netflix plans higher content spending and paused buybacks to accumulate cash for the WBD acquisition.
• Belton says Netflix's valuation is increasingly attractive after a roughly 30% decline.
• Advertising revenue is guided to double again, which could reaccelerate total revenue growth.
• A WBD deal could add a large content library and reduce future content investment needs.
• Belton declined to discuss WBD deal price or a standalone WBD view.
• He says investors may need patience with the multiyear Netflix story.