Streaming specialist Netflix (NFLX 0.73%) requires no introduction. The company has become one of the most recognizable brands, especially in media.
However, Netflix has made plenty of noise over the past couple of months that deserves closer attention. What exactly is going on? And is the stock still worth investing in after all this noise?
Let's find out.
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Netflix's on-schedule stock split
One move Netflix made recently that grabbed a lot of attention was its 10-for-1 stock split. Based on historical patterns, it came right on time for the streaming giant.
It also got the market excited for the same reasons stock splits often do. They don't make a company's underlying operations any stronger, but they often signal a strong medium-term outlook for the stock -- or at least management's confidence that the share price will continue rising.
Netflix's shares also look far cheaper now, at about $100 each, versus the previous price of $1,000 or more. Of course, they aren't actually less expensive than before, based on how stock splits work.
Perceptions do matter, though. And the perception of a cheaper stock price -- as well as the ability to attract more buyers -- all played a role in Netflix's stock jumping on news of its split. Since the company implemented it, though, other developments have captured the market's attention. Let's turn to the most important of them.
A major acquisition is in the works
On Dec. 5, Netflix announced it would acquire Warner Bros. Discovery or at least some assets of this large media company, including film and TV studios, as well as the HBO Max streaming service, among others. The transaction will cost Netflix $72 billion in equity value and an enterprise value of $82.7 billion. There are plenty of reasons -- besides the sheer cost of this deal -- why analysts, Hollywood fans, and pretty much everyone else are interested in this deal.
However, for investors, there are several key considerations. First, the acquisition is by no means certain to go through. There will be regulatory scrutiny, especially as several notable lawmakers have already spoken against the deal.
NASDAQ: NFLX
Key Data Points
Second, Netflix may have to win a bidding war. Paramount Skydance, another media giant, launched a hostile bid to acquire Warner Bros. after Netflix's announcement. Paramount is willing to pay an enterprise value of $108.4 billion. This bidding war may or may not end soon, and its outcome remains unclear.
Third, if Netflix wins, it will fund the acquisition with a $59 billion loan, adding significant debt to its balance sheet.
Is Netflix stock a buy?
All these developments shouldn't lead us to forget about the company's financial results. It is still performing very well on that front. Management had a rare earnings miss in the third quarter, but that was due to a tax expense in Brazil resulting from disputes with the country's authorities, a problem that shouldn't affect its future financial results.
Overall, though, Netflix remains the king of streaming with a large and growing number of users, a rich content library, and plenty of white space ahead as cable TV continues its slow death. The company also has a strong competitive advantage thanks to network effects and a strong brand name.
All of those make a strong case in its favor. What about the attempted acquisition of Warner Bros.? If it goes through, it would instantly grant Netflix access to a huge content library.
Size wouldn't be the only factor here. The company would inherit highly popular movies and TV franchises, while further expanding its presence in areas of the streaming industry -- such as sports -- where it has been looking to make a push. Leveraging these advantages could help strengthen its user engagement and make it even more dominant in the industry.
There will be challenges, but in my view, given Netflix's track record, this acquisition would be a plus for the company. That's why the stock remains attractive right now.
