Netflix stock climbed above $100 per share on Monday, to its highest levels since May — fueled by a rumor circulating on Wall Street that Disney might possibly be interested in acquiring the video-streaming leader.
Netflix stock closed up 4.1% Monday, to $102.63 per share, on higher-than-usual volume. On Tuesday, Netflix shares climbed as high as $104.44 in early trading, before settling down to below the opening price of $103.50.
Rumors that the Mouse House or possibly Apple might be interested in snapping up Netflix — which currently has a market cap exceeding $44 billion — were alluded to in a research note by Robert W. Baird & Co. analyst Will Power. Regarding “recent M&A rumors,” Power wrote, “whether Disney, Apple or someone else, Netflix could become a target.”
Netflix investors have been concerned about the company’s slowing growth in the U.S., as it undertakes a shift to move all subscribers to the $9.99-per-month standard tier. The stock, which has a notoriously volatile history, is trading well off its $133.27 per share 52-week high.
Speculation that Disney might be looking to make a major deal for Netflix comes after the media conglomerate was said to be looking at buying Twitter, according to a Bloomberg report. Disney also has demonstrated a keen interest in the streaming-video market: In August, it announced the purchase of a 33% stake in Major League Baseball’s BAM Tech unit for $1 billion.
The first issue for Disney would be trying to justify the massive purchase price: Netflix trades at a whopping price-earnings ratio of around 320, and any deal would have a negative impact on Disney’s balance sheet and earnings. Disney also would face other potential hurdles if it actually moved to buy Netflix, including regulatory scrutiny and the fact that rival studios would be even more reluctant to play ball with a Disney-owned Netflix.