Netflix shares dipped Monday after Paramount announced a hostile takeover bid, fueling worries on Wall Street that the streaming giant may not be able to pull off its audacious acquisition.<\/p>\n
Netflix stock closed down nearly 3.5% to $96.79 a share after Paramount moved to take its case directly to Warner Bros. Discovery shareholders, offering $30 a share<\/a> in a deal valued at $78 billion for the whole company. Last week, Netflix said it reached an agreement with WBD to buy its film and TV studios, Burbank lot, HBO and HBO Max for $27.75 a share, a $72-billion offer. Netflix would also take on more than $10 billion in Warner Bros. debt, for a deal value of $82.7 billion. <\/p>\n On Monday, analyst Jeffrey Wlodarczak, CEO of Pivotal Research Group, downgraded his rating on Netflix stock from buy to hold, citing concerns that Paramount\u2019s bid could increase the price Netflix could pay for the WBD assets. Regulatory issues may also change the terms of the deal, such as Netflix giving up HBO to a rival, Wlodarczak said. \u201cThe question is, what modifications might they have to make?\u201d he said. <\/p>\n Wlodarczak also questioned Netflix\u2019s engagement levels with customers, which is key to retaining subscribers on the platform. He said that \u201cthis very expensive deal\u201d highlights Netflix\u2019s concern that short-form entertainment on platforms like TikTok and YouTube are attracting younger consumers. <\/p>\n YouTube \u2014 once known as a place for amateur user-generated videos \u2014 has become an entertainment powerhouse, encapsulating the largest percentage of streaming<\/a> on U.S. TVs, according to Nielsen. In October, YouTube represented 12.9% of U.S. TV viewing time, compared to Netflix\u2019s 8%.<\/p>\n Netflix said its customer engagement \u201cremains healthy,\u201d noting in a shareholder letter in October that it grew its engagement in the U.S. and U.K. by 15% and 22%, from the fourth quarter of 2022 to the third quarter of 2025, citing data from Nielsen and Barb, which tracks viewership.<\/p>\n Equity research publisher MoffettNathanson analysts said questions have been building about Netflix\u2019s engagement growth, adding that even though Netflix\u2019s share of total TV time started to grow in the second half of the year, \u201cYouTube\u2019s share gains have overshadowed most of the other streaming platforms.\u201d<\/p>\n \u201cThere\u2019s issues with Netflix engagement, sort of flatlining,\u201d Wlodarczak said. \u201cYou get a lot better content, it should help with your engagement. \u2026 Is this a signal they\u2019re really starting to get worried about engagement, and they\u2019re out doing this deal because younger people are just spending increasing amounts of time not sitting there watching hour-long shows?\u201d<\/p>\n Netflix declined to comment on Wlodarczak\u2019s report.<\/p>\n On Friday in a call with investors, Netflix executives emphasized that their business is healthy and growing. They pointed out how sci-fi hit show \u201cStranger Things<\/a>\u201d was very popular with younger audiences, as well as series like the drama \u201cOuter Banks\u201d<\/a> and movies including \u201cKPop Demon Hunters.\u201d<\/p>\n \u201cWe had record engagement previous quarter,\u201d said Co-Chief Executive Ted Sarandos on the Friday call. \u201cWe\u2019re happy with our outlook for the ongoing organic growth and engagement \u2026 Our core fundamentals are strong. This gives us a very unique opportunity to accelerate an already very successful model.\u201d<\/p>\n Whether the deal will go through remains an open question, as Netflix would not make the acquisition until 12 to 18 months from now, after Warner Bros. Discovery separates its company, spinning off its cable channels<\/a> into a new publicly traded company.<\/p>\n Wedbush Securities analysts, who have an outperform rating on the stock, said in a note on Monday that they are skeptical that the deal will pass regulatory scrutiny.<\/p>\n \u201cUltimately, we think the DOJ will reject a deal without concessions on pricing and industry standards,\u201d the analysts wrote.<\/p>\n On Monday, Netflix executives said they were confident the deal would go through. Co-Chief Executive Greg Peters pointed out that Netflix still represents a smaller share of U.S. TV viewing in the U.S. compared to YouTube, even if it were to combine with Warner Bros. Discover, citing Nielsen data.<\/p>\n \u201cWe think there\u2019s a strong fundamental case here for why regulators should approve this deal,\u201d he said.<\/p>\n