Rumors that Disney is considering an acquisition of Netflix sent the SVOD provider’s stock price climbing, but the news may simply be wishful thinking on the part of analysts who have advocated a sale while Netflix shares are still hot.
Netflix closed up 4.14 percent on Monday and continued to rise Tuesday after a MarketWatch article citing “chatter on Wall Street” said that Disney is “on the prowl” for another media asset and that Netflix is squarely in its sights. Naturally, neither company would comment on the rumor.
However, there’s plenty to be skeptical about. It’s significant that The Wall Street Journal has not written a word about the rumor.
Analysts have been floating the idea that Netflix is a ripe acquisition target for a while now; Paolo Pescatore of CCS Insight enumerated the reasons to me in a conversation at IBC in mid-September. “I think they’re going to run out of cash,” he said at the time, citing flagging subscriber numbers.
“We’ve long argued that Netflix is a takeover target for one of the leading Web providers. … But in the last year we’ve made a case for Disney,” Pescatore said in a statement emailed around to the media this morning. “Netflix is global, an established and proven platform and available on a plethora of devices. This would be goldmine for Disney given its growing presence in online video and represents a great channel for distributing the slew of Disney content around the world. Furthermore it offers plentiful opportunities to reach new audiences.”
MarketWatch itself was citing an R.W. Baird client note that said Netflix had been the subject of “recent M&A rumors.”
Meantime, other analysts have been quick to bring up the downside of an acquisition by Disney. "I think it's very much speculation, I don't think that Disney has really said anything publicly that should make people assume that they're going to step up and do what so many other media companies have tried to do, unsuccessfully, which is buy a big Internet company," said Barton Crockett, senior analyst at FBR Research, to TheStreet.
Likewise, Cantor Fitzgerald’s Youssef Squali believes Netflix will continue to grow “on its own for several years.”
And Motley Fool’s Rick Munarriz discounted the rumor entirely, explaining why it made no sense. Being owned by Disney would make it harder for Netflix to acquire content from the media giant’s competitors; such an acquisition would dilute Disney’s earnings; and Netflix would be a really, really expensive buy, if it’s on the block at all.
After all, “You can't buy what isn't for sale,” Munarriz concluded.