Here’s Why CFRA Downgraded Netflix (NFLX) to Hold From Buy

Netflix, Inc. (NASDAQ:NFLX) is one of the best major stocks to invest in right now. On January 5, Netflix, Inc. (NASDAQ:NFLX) was downgraded to Hold from Buy by CFRA, bringing the price target down to $100 from $130. The firm attributed the downgrade to the pending acquisition of Warner Bros Discovery by Netflix, Inc. (NASDAQ:NFLX), stating that the company’s strategy for decades has not included acquisitions. In addition, Warner’s high debt presents risks, according to the firm. CFRA also believes that the potential for a bidding war with Paramount for the acquisition may propel Netflix, Inc.’s (NASDAQ:NFLX) debt financing higher.

Reuters reported on December 23 that, according to prominent shareholder Harris Oakmark, Paramount’s latest offer to buy Warner Bros Discovery is “still not good enough”. Harris Oakmark portfolio manager and Director of U.S. Research Alex Fitch told Reuters in an email that while the changes in Paramount’s new offer were necessary, they were not sufficient. According to him, Paramount needs to offer a greater incentive if it is serious about winning. The time frame for Warner Bros investors to accept or reject the so-called tender offer has been extended from January 8 to January 21.

However, the board of Warner Bros unanimously recommended on December 17 that shareholders reject Paramount’s earlier bid in favor of Netflix, Inc.’s (NASDAQ:NFLX) offer, adding that the financing failed to offer a “full backstop”. Although Netflix, Inc.’s (NASDAQ:NFLX) cash offer of $23.25 a share is lower, the board deemed the bid superior because of the more secure financing, along with the fact that it includes $4.50 in shares of Netflix common stock in addition to whatever Warner Bros can get when Discovery Global is spun out as part of the deal.

Netflix, Inc. (NASDAQ:NFLX) provides entertainment services through paid memberships in around 190 countries worldwide. It acquires, produces, and licenses content for streaming, including original programming.

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Disclosure: None. This article is originally published at Insider Monkey.