Netflix (NFLX) remains locked in a tug-of-war with Paramount Skydance (PSKY) over Warner Bros. Discovery’s (WBD) best assets, including HBO and Warner Bros. Studios.

History has numerous examples of lengthy takeover battles that benefited the loser rather than the ultimate victor. To the victor, the spoils often do not follow. 

At least, that’s the opinion of veteran finance columnist Mark Hulbert, whose latest piece, Why the smartest move for Netflix and Paramount is to let the other guy win Warner Bros. 

“Most mergers and acquisitions don’t work out. One comprehensive analysis of over 40,000 mergers and acquisitions over four decades found that between 70% and 75% of them failed. Another study put the failure rate at 83%,” Hulbert wrote on Feb. 24. 

I’ve been writing about stocks for over 20 years. If I had a dollar for every time a company used the word “transformative” to describe a multi-billion-dollar acquisition, I would have made a lot of money.

The truth is, as Hulburt states, high-stakes acquisitions tend to be value-destructive on a massive scale. They rarely work.

But I digress. Several things caught my attention about Netflix’s options trading on Wednesday.  

For starters, its options volume was 1.29 million, more than double its 30-day average of 522,332. Secondly, it had 24 unusually active options yesterday that were expiring in seven days or later and had a Vol/OI (volume-to-open-interest) ratio of 1.38 or higher, including five with volume of 20,000 or more. 

I’m not a technician, but Netflix stock hit a 52-week low on Tuesday, suggesting it is either the beginning of its next leg up or a dead-cat bounce. 

Here are my thoughts on both. 

The 5 Standouts From Netflix’s Unusually Active Options

As you can see above, all five of the options with the highest volume were calls; all had expiration dates I would consider intermediate-term. Several options strategies come to mind if you’re bullish. 

The sales data for the $90 and $105 calls expiring on May 15 points to Bull Call Spreads. While the odds of the share price being above the $92.98 breakeven at expiration are a little over one in four, the outlay of $2.98 (3.6%) is reasonable, especially when you can roll the spread to a later expiration by selling the existing bull call spread and buying a new one. While it adds to the total cost, it gives you more time for the strategy to play out. The same applies to the two calls expiring on Sept. 18. In this case, you’re taking on a higher net debit -- $5.30 compared to $2.98 -- for an additional 18 weeks of time decay. In either case, you are moderately bullish about the stock’s future value and are using the bull call spread to reduce the cost of just buying one long call. The risk is that the stock runs big and your profits are capped at the $105 and $110 strike prices.

Lastly, there is the June 18 $95 call. It expires in 113 days. The Covered Call would likely be the options strategy used. 

As you can see from the data below, you simultaneously buy 100 shares of Netflix at $82.70 and sell one June $18 $95 call for a $3.30 premium. To breakeven or make money on the trade, the share price at expiration in June should be above $79.40. The odds of that happening are over 57%. 

Now, let’s consider whether the options volume and unusual options activity from yesterday were extremely bullish or a dead-cat bounce.

Netflix Rebound Only Temporary

Since Netflix hit a 52-week and 20-year high of $134.12 last June, its share price has fallen by over 38%. While it would be tempting to blame the share price decline on its attempt to acquire Warner Bros.' best assets, the reality is that the share price was falling well before the November speculation that it would make a bid for all or pieces of the company. 

By the Dec. 4 close, the day before Netflix announced its bid, the shares had fallen by $31, or 60% of the losses it accumulated from June 30, 2025, through Feb. 25, 2026. 

So, while investors questioned why Netflix would make a costly bid for these assets, there were other concerns as well, mostly centered around guidance. 

On July 17, it reported Q2 2025 results. Although solid -- earnings per share, revenues, and operating margins all exceeded Wall Street’s expectations -- investors were surprised that the company’s guidance for the rest of fiscal 2025 wasn’t more robust, leading some to believe growth would slow. 

The last time Netflix faced a growth crisis in 2022, it cracked down on password sharing and added an ad-supported tier, which did the trick. Membership growth has benefited from the changes.   

But is it enough?

With YouTube and TikTok continuing to gain share, the possibility of Netflix losing its grip on the streaming market remains real.

CEO Ted Sarandos is said to be in Washington today looking to appease regulators over their antitrust concerns. That suggests Netflix is still very bullish about its offer. Two days ago, Paramount Skydance increased its bid by $1 to $31 a share. It’s offering to buy all of Warner Bros. Discovery.  

While the upswing in Netflix’s share price would indicate that investors believe it will lose the fight -- Paramount Skydance would pay a $2.8 billion breakup fee that WBD is required to pay Netflix -- Sarandos wouldn’t go to Washington for nothing. 

From where I sit, I wouldn’t bet against Netflix upping their bid should Warner Bros. Discovery’s board accept Paramount’s new offer. Netflix would have four days to do so. 

If it happens, you can bet the latest move higher is a dead-cat bounce.

Netflix Is Ready to Move Above $100

Netflix’s business remains solid. 

In 2025, revenues grew by 17% on a currency-adjusted basis, with paid memberships exceeding 325 million and operating income up 30% year over year. As a result of the top and bottom-line growth, its free cash flow last year was $9.5 billion, 38% higher than in 2024. 

I’ve always believed that as long as Netflix’s engagement (hours viewed) was up -- they gained 2% in the second half of 2025 -- combined with an increase in paid memberships, the profits would take care of themselves--and they have. 

In the first half of 2026, its members viewed over 95 billion hours on Netflix (1% increase over 2024’s first half), while in the second half, members watched more than 96 billion hours, 2% higher than in 2024. At the same time, it continues to grow its paid membership. In 2025, it was over 325 million; a decade ago, it was 70.84 million.     

So, even a 1% increase in viewing hours, combined with a 7.7% increase in paid memberships in 2025 and higher prices, will push profits higher. 

In 2025, its operating margin was 29.5%. It expects that to increase by 200 basis points in 2026. In 2023, it was 20.6%. 

It doesn’t need to move the needle all that much to boost its free cash flow. In 2026, it should be stronger than ever, likely well above $10 billion. 

The Bottom Line on Netflix Stock

Whether or not Netflix succeeds in acquiring Warner Bros.’ assets, the business is in a good place right now. I don’t see that changing. 

Analysts are relatively positive about the stock. Of the 43 that cover it, 29 rate it a Buy (4.21 out of 5) with a target price of $113.23. I don’t see that changing either. 

What will change if it is successful in its acquisition of WBD is the balance sheet. The amount of debt it holds goes way up. Currently, its total debt is $16.98 billion or a low 5% of its market cap. 

The company is expected to use $52 billion in new debt to finance the acquisition, along with nearly $11 billion in assumed debt from Warner Bros. However, that will be offset by increased free cash flow, especially after it finds $2 billion and $3 billion in expected cost synergies post-closing.  

Time will tell, but to me, yesterday’s unusual options activity suggests Netflix stock is about to go on an extended run higher. It’s in the cards. 

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