Buy Netflix Stock for a Rebound as Q4 Earnings Approach?

Investors are eying Netflix NFLX)stock when markets reopen on Tuesday, January 20, as the streaming giant is scheduled to report its Q4 results after market hours.

Netflix stock is down 6% in the first 11 trading days of 2026, with markets closed on Monday in observance of Martin Luther King Day.

Notably, this will be Netflix’s first quarterly report since implementing a 10-1 forward stock split in November to make shares more affordable to employees. On top of that, Netflix is in discussions to acquire Warner Bros. Discovery WBD.

This certainly makes it a worthy topic of whether it's time to buy NFLX for a rebound amid a 20% post-split decline, which has been correlated with profit taking and broader market weakness.   

Netflix’s Q4 Expectations

Based on Zacks estimates, Netflix’s Q4 sales are thought to have increased 17% year over year to $11.97 billion. Even better, Q4 EPS is expected to be up 28% to $0.55. Netflix is expected to round out fiscal 2025 with total sales increasing 15% to $45.1 billion and annual earnings spiking 28% to $2.53 per share.

Warner Bros Acquisition Offer 

In December, Netflix announced an agreement to acquire Warner Bros’ studios and streaming businesses in a deal valued at $82.7 billion. It’s noteworthy that absorbing Warner Bros’ HBO Max platform would add about 95-100 million subscribers, pushing Netflix’s total subscribers to 370 million +. This would add more distance and competitive pressure on Disney’s DIS combined streaming services and Amazon's AMZN Prime Video services, with both having over 200+ million subscribers. 

Netflix is even considering adjusting the offer to an all-cash deal, signaling how serious they are about closing the deal and emerging as the leading buyer after Warner Bros rejected competing bids from Paramount Skydance PSKY and Comcast CMCSA.

Warner Bros' board has recommended Netflix’s acquisition to shareholders, emphasizing that a deal with Netflix would create superior and more certain value, while mitigating downside risks. In contrast, Paramount’s proposal was described as “illusory” and depended on an enormous amount of debt financing, making it far less likely to close successfully. To that point, a Paramount deal would saddle Warner Bros with $87 billion in debt, creating instability and uncertainty for shareholders, as it could also be terminated or amended at any time and presented a more hostile takeover even with the offer being north of $100 billion.

As for Comcast, it submitted an undisclosed offer during the first round of offers but didn’t advance to the final round. With Netflix being the frontrunner, the acquisition depends on Warner Bros spinning off its TV networks division, which is expected to be done by mid-to-late 2026.

Netflix’s Impressive ROIC

Acquiring Warner Bros would add over $30 billion in annual revenue to Netflix’s top line, and more encouraging is the streaming giant’s ability to make good on capital investments. Showing the canny ability to turn capital investments into profits, Netflix has a high return on invested capital (ROIC) percentage that’s over 25%. It’s noteworthy that the often admirable ROIC is 20% or higher, with Netflix’s Zacks Broadcast Radio and Television Industry average at 12%.

Monitoring Netflix’s P/E Valuation

At current levels, Netflix stock has started to trade at a more attractive forward earnings multiple of 27X. While this is still a noticeable premium to the industry average of 11X, Netflix is the clear leader in the space as linear TV continues to fade and has moved closer to the benchmark S&P 500’s average of 23X.

Bottom Line

It’s very tempting to buy Netflix stock ahead of its Q4 report, but for now, NFLX lands a Zacks Rank #3 (Hold). That said, a buy rating and a halt to Netflix’s post-split decline could be ahead if the company’s Q4 results are strong and it gives positive guidance, including on its plans for Warner Bros.  

One thing is for sure: at under $100 a share compared to pre-split levels of over $1,100, NFLX is on more investors' watchlists.

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This article originally published on Zacks Investment Research (zacks.com).

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