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Summary
- Netflix has been one of the worst-performing mega-cap stocks in Q4.
- Investor sentiment has been crushed by doubts about growth and ongoing M&A uncertainty.
- However, improving technicals and overwhelming analyst support suggest a rebound could be coming in Q1.
As we head into the final few sessions of 2025, Netflix Inc. (NASDAQ: NFLX) is on track to finish Q4 as one of the market’s clear laggards. Shares of the streaming giant fell roughly 20% over the period, sharply underperforming the S&P 500, which logged a gain of more than 3%. In the broader context, Netflix is trading back near where it stood this time last year, having lost more than 30% since its all-time high in July.
Overall, the sell-off reflects a broad loss of confidence. Investors have questioned whether Netflix can maintain its historical growth rates, grown uneasy about its proposed acquisition of Warner Bros. Discovery, and have remained unsettled by October’s dodgy earnings report. However, there are several reasons to think the worst-case scenario is now priced in, and the stock’s risk/reward profile is skewing north. Let’s take a look at why Netflix could be a sneaky comeback contender for Q1.
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Why the Market May Have Overreacted to Q4
Starting with October’s earnings report, it was a clear disappointment that set the tone for the rest of the quarter, but it is worth separating optics from reality. Despite an EPS miss, Netflix still delivered its highest revenue print ever, and that distinction matters. Demand didn’t collapse, nor did the business suddenly lose relevance. Instead, the report undermined confidence in near-term execution and reignited doubts about the durability of growth.
Markets tend to punish uncertainty almost as much as, if not more than, bad news, and Netflix was hit with both at once. Growth skepticism resurfaced right as expectations were already elevated, creating the conditions for a rush to the exit and a sharp drop, despite the company having logged several quarters of solid earnings reports beforehand.
This is often how worst-case-scenario quarters look. Investors stop giving management the benefit of the doubt, and sentiment swings decisively negative even if the broader equity market is doing well.
M&A Uncertainty Is Clouding the Picture
It didn’t help matters that in the weeks following October’s miss, further uncertainty was created by Netflix’s bid for Warner Bros. Discovery. The situation then became more complex after a competing offer from Paramount–Skydance exceeded Netflix’s bid, even if the Warner Bros. board has reportedly recommended that shareholders reject it in favor of Netflix’s proposal.
For investors, this move raises a ton of uncomfortable questions. A potential bidding war introduces the risk of unplanned leverage, with the prospect of a heavier debt load unlikely to win them any favors at a time when balance sheet discipline is under increased scrutiny. Even if Netflix ultimately prevails, the path there could involve higher costs and prolonged uncertainty before any clear payoff emerges.
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Technicals and Analysts Are Starting to Align
The thing is, though, while sentiment has been weak, the technical picture is beginning to suggest the tide is turning. Netflix’s RSI is now approaching extremely oversold territory, a level that often signals selling pressure is close to exhaustion. At the same time, the MACD is forming a bullish crossover, suggesting downside momentum is fading, and the bulls are starting to wrest back control.
Price action is also stabilizing. The stock has begun to consolidate above the $90 level, and holding that zone into January would reinforce the idea that sellers have largely stepped aside and a recovery rally is about to begin.
Recent analyst behavior adds further weight to this theory. Over the past few weeks, the teams at Morgan Stanley, DZ Bank, Jefferies, Wolfe Research, and Needham, to name just a few, have been reiterating Buy or equivalent ratings.
Some of the refreshed price targets now range as high as $152, implying targeted upside of around 60% from current levels. For those of us on the sidelines, that kind of target is hard to ignore.
What Needs to Happen for a Q1 Comeback
For Netflix to mount a meaningful comeback in Q1, three things need to fall into place. First, the stock must continue to hold above $90, confirming that consolidation is turning into a base rather than another pause before lower lows. Second, clarity needs to emerge on the Warner Bros. acquisition, ideally without forcing Netflix into a balance sheet stretch that undermines confidence. Third, January’s earnings report needs to beat expectations and make October’s miss look like a rare slip rather than the start of a downturn.
If those conditions are met, the setup looks compelling. Expectations are low, sentiment is close to rock bottom, and the stock is technically washed out. In a market crowded with mega-cap tech names trading near highs, Netflix’s depressed price and credible rebound potential stand out.
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