Netflix needs a new growth story to halt its stock decline

Netflix shares have come under pressure in recent months as investors question what will drive the company's next phase of growth following the collapse of its proposed acquisition of Warner Bros. Discovery.

The streaming giant's stock has fallen 14% since Feb. 26, when Netflix declined to match Paramount Skydance's $81 billion bid for Warner Bros. Discovery.

Over the past 12 months, the shares have lost more than 40% of their value, despite the company continuing to post solid growth and profitability.

The failed deal highlighted both the opportunities and challenges facing Netflix as it seeks new ways to attract subscribers and increase engagement.

NFLX shares were up 0.27% on Monday.

Podcasts and gaming expand beyond streaming

Netflix has broadened its offerings beyond traditional video streaming by expanding into podcasts and gaming.

During the FIFA World Cup, users have been able to watch The Rest Is Football, a daily video podcast hosted by former England striker and BBC presenter Gary Lineker, and play the video game FIFA World Cup: Launch Edition.

The initiatives are part of a broader strategy aimed at increasing user engagement and supporting subscriber growth after Netflix cracked down on password sharing, introduced advertising-supported subscription tiers, and raised prices.

However, analysts remain skeptical that these newer businesses can materially move the company's financial performance.

“Barring an acquisition, I don’t think there’s a ton to move the needle beyond the core business,” Morningstar analyst Matthew Dolgin said in a Barrons report.

“To get sentiment as bullish as it was before, they really need to show more acceleration.”

Dolgin rates Netflix two stars out of five and estimates that $80 would be a fair value for the stock.

Competition intensifies as viewer engagement slips

One of Netflix's biggest challenges is maintaining viewer engagement in an increasingly competitive streaming market.

According to Nielsen data, Alphabet's YouTube TV increased its share of US streaming time to 28% from 25% over the two years through March 2026.

During the same period, Netflix's share fell to 17% from 21%.

Analysts say the decline reflects concerns over the company's intellectual property portfolio and ability to consistently produce blockbuster content.

“People are wondering what turns the ship here. There’s not a clear view of what Netflix does next, and that’s why the stock has struggled,” Matthew Condon, a director of equity research at Citizens JMP who rates the stock at Market Perform.

“Netflix’s share of streaming time is very stagnant,” says Condon. “They don’t have a ton of great intellectual property, which was the interesting thing about Warner Bros.”

The abandoned Warner Bros. acquisition would have provided Netflix with major franchises, including Harry Potter and Batman, assets that could have helped improve user engagement.

Content spending and M&A questions persist

Netflix avoided taking on more than $50 billion in additional debt by stepping away from the Warner Bros. transaction and received a $2.8 billion breakup fee.

Still, investors remain concerned that the company could pursue another acquisition to accelerate growth.

Rumors linking Netflix to Lionsgate Studios have persisted despite the company denying interest in a deal.

The company also faces leadership uncertainty following the announcement that co-founder Reed Hastings would step down as chairman.

Meanwhile, Netflix plans to increase content spending by 10% in 2026 as it seeks to develop another global hit comparable to Squid Game or Stranger Things.

Although such investments could improve engagement, they are also expected to pressure profit margins.

Despite the recent selloff, some investors see value emerging.

The stock currently trades at a price-to-earnings multiple of 24, roughly in line with the S&P 500 average, underscoring the debate over whether Netflix's recent weakness represents a long-term buying opportunity or a reflection of slowing momentum.