Netflix stock shoots up 5%

Following rumors of a possible buyout by Amazon

By Jennifer Netherby -- Video Business, 6/6/2007

JUNE 6 | Netflix’s stock shot up 5% in morning trading on hazy rumors of a possible takeover by Amazon.com.

The online retailer’s stock price was up 5.3% to trade at $22.53 at one point Wednesday afternoon. Amazon’s stock price slid 1.96% to $72.21. Trading volume on Netflix also was up.

Both companies declined to comment, citing policies against commenting on speculation.

But posters on stock message boards ran with it Wednesday, speculating on the possibilities.

Jackson Securities analyst Brian Bolan said he has heard talk from industry contacts that Amazon is considering acquiring Netflix but added that he wasn’t sure how much truth there was to it.

“That’s the $64,000 question, how real is any rumor,” he said.

However, he said he thinks it is likely that Amazon is taking a look at Netflix. Amazon’s stock price has been up since the start of the year. Meanwhile, Netflix’s price has been down since the company reported lower-than-expected earnings in the first quarter.

Bolan said that given Netflix’s stock price, the company’s market value is around $1.5 billion, which would make it Amazon’s biggest acquisition, if it were to buy the company.

An acquisition of Netflix could allow Amazon to add to its active customer base with Netflix subscribers, he said. For Netflix, an Amazon acquisition could strengthen its position in the fight against Blockbuster, which has made strong subscriber gains since launching its Total Access program, which allows subscribers to rent movies online or in-store for one price.

But Bolan said he didn’t think any acquisition was imminent, speculating that Amazon would wait to see whether subscribers stick with Netflix or move away from the service in the coming quarter. Netflix has said it expects its subscriber base to stay flat in the second quarter because of competition from Blockbuster.