Netflix May Pursue M&A Opportunities Elsewhere Amid Content Risk, Says Gary Black

• NLFX shares fell more than 10% on Friday, on track for its steepest decline in nearly four years, after the company’s Q2 outlook disappointed investors.
• According to Black, despite the weak Q2 guidance for revenue and earnings, the company had maintained its sales and operating margin guidance for fiscal year 2026. 
• Meanwhile, according to data from Koyfin, analysts have a 12-month average price target of $114.50 on Netflix, indicating an upside potential of about 18% compared to its current trading price.

Gary Black, managing partner at The Future Fund, said on Friday that Netflix Inc. (NFLX) may still look at mergers and acquisitions opportunities elsewhere after its decision to abandon its high-profile bid for Warner Bros Discovery Inc. (WBD) amid plans to rely heavily on content to drive growth.

“The key risk is that NFLX still needs content and may pursue an M&A opportunity elsewhere,” Black said in a post on X.

NLFX shares more than 10.17% on Friday, on track for its steepest decline in nearly four years, after the company’s second-quarter (Q2) outlook disappointed investors. Despite the selloff, Black said that the market reaction seemed to be “overdone.”

What’s Working For Netflix?

According to Black, despite the weak Q2 guidance for revenue and earnings, the company had maintained its sales and operating margin guidance for fiscal year 2026.

In its latest earnings release posted on Thursday, the media giant reiterated full-year revenue outlook of $50.7 billion to $51.7 billion, indicating 12%-14% growth. Netflix also said that it was targeting an operating margin of 31.5%
for the year, compared to 29.5% in 2025.

Black added that Netflix still looks “compelling” based on its valuation relative to expected growth.

Earnings Snapshot

For Q1 2026, Netflix reported $12.25 billion in revenues, a 16.2% growth year-on-year, and EPS of $1.23, more than analysts’ expectations of $0.77 per share. For Q2, Netflix said that it expected to post EPS of $0.78, below consensus estimates of $0.84, and a 13.5% growth in quarterly revenue to $12.57 billion.

Additionally, it also said that its chairman Reed Hastings will step down from the board once his term expires in June.

Street Consensus

Earlier on Friday, media veteran Tom Rogers said in an interview that Netflix's pursuit of the WBD deal had potentially hurt the stock, raising concerns among investors. The company, however, had said that there had been no material impact from costs related to the deal not materializing.

Meanwhile, Seaport Research raised its price target on Netflix to $119 from $115 and kept a ‘Buy’ rating on the shares after its earnings release, according to TheFly. Needham also maintained a ‘Buy’ rating on NFLX shares and $120 price target after its Q1 results.

According to data from Koyfin, 38 of 51 analysts covering the stock have a ‘Buy’ rating or higher, with a 12-month average price target of $114.50, indicating an upside potential of about 18% compared to its current trading price.

What Is Retail Saying?

On Stocktwits, retail sentiment around NFLX shares remained in the ‘extremely bullish’ territory over the past 24 hours amid ‘extremely high’ message volumes.

One bullish user suggested buying the dip.

https://stocktwits.com/JOEYBUYDEN/message/650607651

Another user pointed out the company’s strong advertising outlook, on track to reach about $3 billion in 2026, adding that the tier would push the company’s shares higher.

NFLX stock has risen about 6% this year.

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