Bernstein analysts examine Netflix's options as Paramount Skydance raises its bid for Warner Bros to $31 per share, escalating a battle for the Hollywood studio. The increased offer includes a higher termination fee of $7 billion, up from $5.8 billion, as Paramount attempts to derail Netflix's existing $27.75 per share deal for Warner's studios and HBO Max. Warner controls lucrative franchises like "Harry Potter" and "Game of Thrones."

Netflix possesses the financial strength to counter Paramount's bid, potentially pushing its offer into the $30-per-share range, according to Bernstein. The analysts note the streaming giant's balance sheet capacity and free cash flow growth could support such a move, with projected synergies of $1.5 billion in 2028 potentially justifying the acquisition despite the higher price tag. Netflix's proposed deal would spin off Warner's television unit.

However, Bernstein suggests walking away remains a rational outcome for Netflix if the deal no longer makes financial sense. The analysts emphasize Netflix's reputation for disciplined capital allocation, noting that the streaming giant should prioritize maintaining its investment strategy over pursuing an acquisition that could hinder growth. Paramount's bid is for Warner Bros in its entirety, unlike Netflix's offer.