Netflix, Inc. disrupted a number of industries when it started streaming movies to put an end to the DVD-renting business. Netflix and its investors have been rewarded by the market for its innovation and the stock is the best performer in the S&P 500 this year. The stock was up about 150% when it hit a $129.29 all-time high in August – and even after a 20% pullback, the stock trades with a massive 117.4% gain year-to-date.
The recent 20% decline that the stock recorded goes on to show the kind of volatility that investors have come to expect from the stock. However, investors are not worried about the prospects of Netflix. In fact, many of them say the pullback as a unique chance to buy the stock on the dip. Buying the stock on the dip makes sense for individual investors but the drop in Netflix valuation might provide an opportunity a bigger company to buyout or acquire Netflix.
Analysts think Apple is a perfect Netflix suitor
Netflix has not offered itself for sale, but there’s little to suggest that shareholders will reject a deal if it dangles the right premium. Hence, some analysts are already making guesses about the players that might be interested in buying Netflix.
Topping the list of potential Netflix buyers is Apple Inc , which has a cash hoard that is big enough to buy a third-world country. Netflix has a market cap of about $45B but Apple sits atop more than $200B in cash and liquid investments. Granted, Apple doesn’t usually make high-profile acquisitions but it might make sense if Apple buys Netflix.
Apple is serious about offering services as part of bundled offers for its hardware. The recent foray into music streaming to compete with Spotify is not panning out well for Apple, and the firm need not make the same mistake with movie streaming. Apple would be smart to buy Netflix instead of trying to launch a streaming service on its Apple TV.
Comcast would benefit from buying Netflix
The second firm that could benefit from buying Netflix is Comcast Corporation . Comcast is a cable TV firm that has been feeling the impact of services such as Netflix as the cord-cutting wave continues. Comcast can afford to purchase Netflix even though the deal might be dilutive and involve some stock. Apart from the financial aspects of the deal, Comcast has much to gain by buying the streaming service than trying to squash it.
To start with, Netflix is serious about making its own original content; hence, its need for content from media firms such as Comcast would end someday. Secondly, a streaming service from Comcast is not likely to find a foothold in the market because U.S. movie streaming space is already maxed out among Netflix, Amazon Prime, and Hulu.