Three of the most closely watched hedge funds on Wall Street added aggressively to their Netflix (NASDAQ:NFLX | NFLX Price Prediction) positions in Q4 2025 as the company’s proposed acquisition of Warner Bros. Discovery (NASDAQ:WBD) collapsed. Ken Griffin’s Citadel Investors added 5.8 million shares, a 549% increase; Jim Simons’ Renaissance Technologies added 4.5 million shares, up 164%; and Philippe Laffont’s Coatue Management added 4.7 million shares, up 75.5%. The timing is deliberate: each firm accumulated shares as deal uncertainty weighed on Netflix’s valuation, positioning them ahead of a fundamental re-rating.
What Happened With the Warner Bros. Deal
Netflix announced an all-cash acquisition of Warner Bros. Discovery at $27.75 per share, backed by a $42.2 billion bridge facility. The deal was called off after Paramount’s offer was deemed superior, triggering a breakup fee scenario and ending Netflix’s most ambitious M&A push. Share buybacks had been paused to fund the deal, and approximately $275 million in acquisition-related expenses were already baked into 2026 guidance.
For many investors, the deal collapse was a relief. The Street quickly refocused on Netflix’s standalone growth trajectory, and the upgrade cycle that followed was swift. Goldman Sachs upgraded Netflix to Buy with a $120 price target on April 7, citing stronger revenue growth, improved margins, and potential for greater shareholder returns. Morgan Stanley maintained its Overweight rating with a $115 target on April 9, pointing to easing concerns around engagement growth and margins. BMO Capital reiterated Buy with a $135 target on April 8.
The Institutional Thesis
The underlying case for Netflix is built on compounding growth across multiple revenue lines. Full-year 2025 revenue reached $45.18 billion, up 15.85% year-over-year, with net income of $10.98 billion, up 26.05%, and free cash flow of $9.46 billion, up 36.68%. The advertising business, once a question mark, is now a material contributor: ad revenue more than doubled in 2025 to over $1.5 billion and is expected to roughly double again in 2026.
2026 guidance calls for revenue of $50.7 billion to $51.7 billion, representing 12% to 14% growth, with an operating margin target of 31.5% and free cash flow of approximately $11 billion. For Griffin, Simons, and Laffont, the post-deal-loss dip likely represented a discounted entry into a business now freed from capital-heavy integration and refocused on organic execution.
Netflix’s subscriber base of more than 325 million paid members gives the platform pricing leverage few competitors can match. The company’s US TV time share hit an all-time high of 9.0% in December, and live programming, including NFL games, boxing, and WWE RAW, is expanding the addressable audience.
Should Retail Investors Follow?
Netflix trades at roughly 40x trailing earnings with a forward P/E of 26x, a premium justified only if margin expansion continues on schedule. The stock is up 8.84% year-to-date and sits well below its 52-week high of $134.12. Jefferies analyst James Heaney expects Netflix to raise full-year 2026 guidance at its Q1 earnings report on April 16, which would serve as a near-term catalyst.
Griffin, Simons, and Laffont are buying into a business with accelerating free cash flow, a growing ad engine, and a balance sheet that shed a $42 billion liability. Institutional investors own 83.7% of Netflix shares outstanding, and the analyst community is overwhelmingly constructive with 37 Buy or Strong Buy ratings versus just 1 Sell. The thesis institutional buyers appear to be acting on: Netflix is a durable cash-flow compounder trading at a discount to where smart money has been building positions. The Q1 earnings report in six days will either validate the setup or reset it.
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