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Disney To Buy Netflix? After Twitter’s Stock Surges Amidst Acquisition Rumors, Netflix Shares Climb Above $100

By Patrick Frye
Published on: 06:08 PST, Oct 5, 2016

Anything that Walt Disney Co. appears to touch jumps in value. Netflix is the latest company to benefit from the golden touch of Mickey Mouse. Amidst rumors of a buyout, the streaming company’s stock climbed above $100 per share on Wall Street.

After Walt Disney Co. had been speculated to be among the list of serious buyers interested in Twitter, the micro-blogging network’s stock jumped more than 20 percent last week. A similar effect was noticed Monday after rumors about Disney seriously considering buying Netflix started doing the rounds. None of the companies have even hinted about any impending acquisition. But that didn’t stop market analysts from boosting the streaming company’s perceived value. Stocks of Netflix jumped more than 4 percent in a single day of trading. Netflix shares climbing above $100 per share is bound to have a huge psychological impact on investors about the company as a sound investment opportunity.

Netflix stock closed up 4.1 percent at $102.63 per share. The surge was fueled by relatively huge trading volume. Since the rumors were neither confirmed or dispelled by either of the companies, stocks continued to climb on Tuesday, and climbed as high as $104.44 in early trading, before settling slightly below its opening price of $103.50.

As expected, a Netflix spokesperson declined to comment but noted that the company is in a blackout period ahead of reporting earnings on October 17. The company’s stocks have seen a lot of ups and downs recently.

It is no secret that Netflix has been struggling recently. Its stocks have gone down by 12 percent this year. At its high point, Netflix stocks were being traded at more than $130 per share. Netflix investors have been rightly concerned about the seemingly stagnant growth, especially in the U.S. market. According to Forbes, Baird’s third quarter subscriber penetration survey suggests “slightly positive to slightly negative U.S. subscriber growth on the quarter.” About 49.2 percent of Americans owned a Netflix subscription in the second quarter. However, the number dropped slightly to 48.6 percent in the third quarter, reported Seeking Alpha.

Just like a wide variety of genres, the streaming company had quite a few tariffs. However, it has been trying to migrate all of its subscribers to a standard, all-you-can-eat tariff plan of $9.99 per month. The prospect of a simplified and standardized tariff across all its customers may seem like a smart move. However, it appears the company is facing some issues in the implementation stage.

Interestingly, Disney isn’t the only company that’s allegedly interested in Netflix. According to a research note by Robert W. Baird & Co. analyst Will Power, even Apple Inc. might be seriously considering Netflix. Disney already heads ESPN. But both the companies are looking for a powerful streaming platform that boosts their footprint on the lucrative segment.

Walt Disney Co. certainly has its own fair share of troubles to deal with. Its shares have underperformed this year. According to Market Watch, Disney shares have lost about 12 percent of their value in this year, while the Dow Jones Industrial Average is up 4.8 percent. Apart from stocks, Disney is rightly worried about unsteady network ratings and the ever increasing number of Americans who are ditching cable for streaming services. These so-called “cord-cutters” are a direct threat to companies like ESPN. Meanwhile, the streaming services offer a reliable and scalable platform for robust growth.

Despite the benefits, several uncertainties cast a dark shadow on the deal. Would Disney’s rivals accept the acquisition? Moreover, the deal could invite regulatory scrutiny.

The streaming industry is slated to grow from $2.4 billion in 2011 to more than $10 billion in the next five years. It is understandable why companies like Disney, Apple, and others are interested in Netflix.

[Featured Image by Justin Sullivan/Getty Images]

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