The Netflix stock price is up more than 5% this week as rumors of a possible takeover continue to gain momentum.
Netflix Inc. (Nasdaq: NFLX) shares closed up 4.14% Monday and were up another 1% today (Tuesday).
Before we get into our recommendation on how to play the Netflix stock price today, here's what investors need to know about the NFLX rally...
Both Walt Disney Co. (NYSE: DIS) and Apple Inc. (Nasdaq: AAPL) are among those rumored to be contemplating a bid for Netflix.
Disney has long been tied to Netflix. The two would nicely complement each other as they're both entertainment companies. Plus, they already work together and Disney CEO Bob Iger is a Netflix fan.
In April, BTIG analyst Richard Greenfield suggested Disney should buy Netflix. He pointed out the pair's already ongoing and synergetic relationship.
"Netflix is already a great friend of Disney, in fact, Iger has repeatedly acknowledged how they are in part responsible for Netflix's success," Greenfield wrote.
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Last month, Netflix became the exclusive pay TV home in the United States for Disney films. That also includes Disney franchises Pixar, Lucasfilm, and Marvel. Plus, Disney has partnered with Netflix on a number of popular shows based on Marvel characters.
Disney continues to make its way into the streaming market. In August, the company invested $1 billion for a 33% stake in BAMTech. That's a video streaming company created by Major League Baseball.
Disney tapped BAMTech to distribute ESPN material, along with a multi-sport subscription service that is sold directly to consumers. It developed Major League Baseball's popular streaming service and also works with HBO and the National Hockey League.
Disney has been struggling with cord-cutters and declining ESPN viewership. So a Netflix acquisition could be the company's only hope, according to Greenfield.
As for Apple, the company considered buying Time Warner Inc. (NYSE: TWX) last fall. A deal never happened, but Apple is still looking for a partner.
Netflix would be an expensive purchase. Right now, it has a market cap of $43.83 billion. But with over $230 billion of cash on hand, a NFLX buy would be an easy transaction for Apple to swallow.
And it may only get more expensive. The Netflix stock price is up 6.1% in the last month to $103.34 a share.
And with earnings coming up this month, the Netflix stock price will be watched closely...
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Netflix reports Q3 results on Oct. 17. Wall Street is looking for EPS of $0.04. In Q2, NFLX posted EPS of $0.09, which beat estimates of $0.02.
But the biggest number to watch will be subscription totals. The company added 1.7 million subscribers in Q2, below its own expectations of 2.5 million.
Despite the disappointment, many analysts remain upbeat on the NFLX stock price and believe the obstacles are simply short-term headwinds. The median analyst rating on Netflix stock is "Overweight," with a $110 price target. Last week, JPMorgan raised its NFLX stock price target to $125 from $116.
At $103.18, NFLX shares are still down 9.79% year to date. But three- and five-year gains are 140.88% and 530.31%, respectively.
And we continue to recommend Netflix stock to investors with a long-term outlook who can weather short-term volatility. You can get our full outlook on the Netflix stock price, right here...
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