Netflix (NFLX.US) saw its market capitalization plummet by $40 billion in just six trading days amid skepticism over its potential acquisition of Warner Bros. Discovery (WBD.US). However, retail investors viewed the steep decline as a strong buy signal.

In the week ending Monday, Netflix ranked as the third most actively traded stock on Interactive Brokers' platform. On Fidelity’s platform, buy orders outpaced sell orders by a ratio exceeding three to one. JPMorgan’s data also confirmed robust retail buying activity.

Steve Sosnick, Chief Strategist at Interactive Brokers, noted, "Our clients have shown a tendency to buy dips in stocks they believe could rebound." He added that the combination of the Warner Bros. Discovery deal speculation, market volatility, and the stock’s slide "is precisely why Netflix surged to prominence in our platform."

Netflix shares tumbled 15% between December 2 and 10, marking their worst six-day losing streak since May 2022. The stock has fallen 23% over the past two months, with concerns over its revenue growth prospects exacerbated by the risks tied to the Warner Bros. Discovery acquisition.

Further unsettling the market was Paramount Global’s (PSKY.US) $108 billion hostile bid for Warner Bros. Discovery, alongside former U.S. President Donald Trump’s antitrust concerns regarding Netflix’s potential purchase. These developments cast shadows over a potential bidding war and regulatory hurdles.

Yet, such steep declines often attract retail investors betting on eventual recoveries. While Netflix’s recent slump has accelerated retail interest, their enthusiasm traces back to late October when reports surfaced about the company exploring a bid for Warner Bros. Discovery. According to Vanda Research, retail traders have since purchased over $520 million worth of Netflix shares.

Netflix started 2025 strong, rallying 50% by June to become the fourth-best performer in the Nasdaq 100 Index. However, it reversed course in the second half, dropping 30% to rank as the index’s seventh-worst performer. Year-to-date, the stock is up just 5.5%.

Trading at a forward P/E of 31x—near its lowest level in over a year and below its five-year average of 34x—Netflix’s valuation reflects heightened caution amid growth uncertainties.