Netflix (NFLX) purchasing Warner Bros. Discovery (WBD) may not be the best option for the No. 1 video streamer, according to a Needham analyst.
“NFLX buying WBD would put $83B of additional value at risk of being disrupted by GenAI,” Needham analyst Laura Martin wrote in a note on Tuesday. “Without WBD, NFLX is more global, more nimble, more tech-first, and has more flexibility with the Hollywood unions (called Guilds).”
The risk that investors may be missing in a Netflix (NFLX) deal for Warner Bros. is the impact that GenAI may have over the next five years.
“We think GenAI adds an extra layer of technology risk to whichever company acquires WBD,” Martin, who has a buy rating and $150 price target on Netflix, wrote in the note.
“Although our GenAI analysis also applies to PSKY, we believe PSKY must take on these risks to garner enough scale to survive,” Martin wrote. “This is not true at NFLX, which can go it alone and thrive without the legacy burdens of WBD’s traditional studio business, we believe.”
Shares of Netflix have dropped 7% since the Warner Bros. deal was announced on Friday.