Netflix, Inc. (NASDAQ: NFLX)
Netflix is having an incredible day in the market today, following up on gains we saw yesterday. If you do some searching for fundamental news surrounding the gains, you’re not going to find much. The truth is that there hasn’t been anything released by the company. However, investors are speculating, and buyout rumors are spreading. Today, we’ll talk about the rumors that led to the gains, whether or not there is any validity to these rumors, what we’re seeing in the market today, and what we can expect to see from NFLX moving forward. So, let’s get right to it…
Buyout Rumors Surround NFLX
As mentioned above, Netflix is gaining for the second day in a row. I did a bit of research and I wasn’t able to find any fundamental news surrounding the stock. However, there is one thing that I was able to find. There are rumors circulating that the company may be acquired. Of course, the internet always tries to rationalize unwarranted gains with rumors.
Nonetheless, the rumors are relatively simple. At the moment, there’s one company that would likely benefit from buying NFLX in a big way. That company is Walt Disney (DIS). Essentially, these two companies entered into an agreement a few years back.
As a result of the agreement, NFLX will soon be able to stream Disney titles to consumers paying for their services. The argument is that, because of this agreement, DIS would benefit greatly if it decided to acquire the company.
Is There Any Validity To The Rumors?
This, my friends, is the million dollar question. First and foremost, let’s be clear here – we have not heard anything from Netflix or from Disney even insinuating that a possible acquisition is on the table. Right now, this is nothing more than a rumor!
With that said, I do see why the rumors are circulating. Soon, NFLX will have the rights to stream titles from Disney and its affiliates. This means titles from Disney, Pixar, Marvel, and several more top titles will soon be available. Unfortunately, that could create a bit of an issue for DIS.
Think about it this way. Even after the recent price increase, NFLX services are available for $12.99 per month. To purchase a Disney movie, you’re likely going to spend quite a bit more than that. As a result, if Disney did acquire Netflix, it would help to protect the value in the titles.
I would imagine that if this acquisition was to actually happen, DIS would be very picky when it came to the titles it would be willing to stream. Limiting titles would help to maintain sales for DIS, adding value. Not to mention, the company would obviously generate more revenue if it did acquire NFLX.
Considering all of the above, the rumors are definitely understandable. However, with no insinuation from Netflix or Disney that the companies are even in talks, an acquisition isn’t likely any time soon.
How The Market Is Reacting To The Rumors
As investors, we learn to watch the news. After all, the news moves the market. Furthermore, there are few factors that seem to be more exciting to investors than possible acquisitions. So naturally, we’re seeing strong movement in the value of NFLX. Yesterday, the stock gained in a big way. Today, we’re seeing more solid movement. Currently (12:01), the stock is trading at $96.43 per share after a gain of $4.95 per share, or 5.41%, thus far today.
What We Can Expect To See Moving Forward
Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from Netflix. While we may see a correction once investors realize that the gains are caused by rumors, the long-term view looks great.
With NFLX offering Disney titles soon, we’re likely to see an increase in the demand for the company’s services. After all, no other company has the ability to capture the imaginations of consumers young and old like Disney. Soon, Netflix will be able to capitalize on that ability. However, that’s not the only reason I maintain a bullish opinion.
Another reason that I have such a bullish opinion with regard to NFLX is the fact that the company recently took its services global. While global services are still very new, the international sales data is promising. So, I’m expecting to see further international growth that will give NFLX a big boost in the market.
What Do You Think?
Where do you think NFLX is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of Wikipedia]