Netflix Nosedive: Is NFLX Stock a Bargain With 60% Upside or a Trap?

The Netflix (NASDAQ:NFLX | NFLX Price Prediction) sell-off has carried into the new year, with shares down 7% year to date or close to 37% from all-time highs hit back in June 2025. Undoubtedly, the bearish moment for Netflix feels worse than it is, especially when you consider that shares were pretty much going parabolic in the first half of last year.

While it’s been quite a painful plunge for the streamer, several notable analysts are standing by their buy ratings. One notable Wall Street pro has a price target that suggests a whopping 85% upside move could be on the table. In the meantime, Netflix is a falling knife, and if history is any indication, things could certainly get a lot nastier if investors’ fears are realized: that the streaming giant needs a big-league studio acquisition to keep its growth going strong.

A Warner Bros. Discovery deal would be a huge win, but it’s going to be expensive, and it’s not even guaranteed

Warner Bros. Discovery (NYSE:WBD) might be a prized asset that’s better off in the hands of Netflix, but at what price? While there are other levers that Netflix can pull to reignite growth without having to spend tens of billions of dollars, questions do linger as to what the firm can do to prevent another one of its vicious valuation resets.

Now, this isn’t the first time that the market has been having a tough time reevaluating the company. Back in 2021 and 2022, Netflix suffered a historic implosion that wiped out 75% of its value. It felt like one of the crashes that stocks don’t recover from (at least not anytime within a decade), but, in due time, the stock eventually recovered in around three years.

Of course, Netflix will always be a staple subscription in the household, but it’s really difficult to envision how the streamer can re-accelerate its sales growth back to the high-teens. If peak subscribers have been achieved following the “freeloader crackdown” and introduction of ad-based tiers, there is growing concern that Netflix may be running into a bit of a growth ceiling of sorts.

Netflix might not need to acquire its way to greater growth

Undoubtedly, live sporting events and a catalog of casual mobile games are areas where Netflix could potentially raise the ceiling. But, of course, it’s going to take time for such efforts to pay off. In any case, I do see live sports as an area Netflix could ramp up the spend if it ultimately can’t acquire Warner Bros., either due to regulatory roadblocks or something else.

Notably, offering more frequent boxing matches could be a way to convince viewers to pay more. With Paramount+’s first UFC event clocking in record viewership, I think combat sports might be the golden ticket to the next frontier of growth for the streamers.

In any case, I do view an acquisition as the easiest way for Netflix to keep its growth going for longer. And I’m sure subscribers can appreciate the slew of new titles that will hit the platform if the deal were to be inked. In the meantime, I think Netflix must get AI right if it’s going to retain its growth multiple.

Of course, I’m not suggesting that the firm flood its platform with AI-generated content. However, I do think AI can be a huge help behind the scenes, as it perhaps looks to reduce the production cycle by a bit, as well as some of the costs associated with it. And, of course, visual effects could be in for a massive AI-powered upgrade in the coming years.

Real value to be had in Netflix?

Either way, if AI can reduce production costs and increase ad value, perhaps Netflix remains a good place to be for growth, even as other investors begin to shy away from the name on weakness.

At 33.4 times trailing price-to-earnings (P/E), I view Netflix as fairly priced, even a tad undervalued if it can execute upon an AI strategy. But whether $135.00 per share (upside of 60% from here), the Street-high target of BMO Capital, is on the table remains the big question. BMO Capital is a fan of the ad momentum as well as AI-driven production efficiencies, which are already having an impact. In terms of AI-led efficiency gains, I still think it’s early days.

While I’m not nearly as bullish as BMO Capital, I do see Netflix shares as offering real value here, especially now that investors have had the opportunity to panic over the uncertainties relating to a potential deal and its growth path ahead