Netflix is on a roll. The stock is two-and-half times what it was a year ago. And the latest AT&T merger news just gave it another push. The cable killer traded 4.43% higher at yesterday’s close of $379.93. That’s a whopping 149% hike from last year’s close of $152.72.
As AT&T (T) enjoys their legal victory in the merger case, it has now set the premise for more competitive bidding and market success for others.
Shortly after the news broke, Time Warner (TWX) was trading up 3% higher, and AT&T is down by about 4%. The verdict essentially allowed for an unconditional vertical merger consequently opening the market for other deals as well.
And this was seen shortly after, as 21st Century Fox (FOXA) shot up 7.3% amidst its rising demand by Disney (DIS) and Comcast (CMCSA). Disney was up 3.28%, while Comcast inched 0.63% higher.
Now what’s interesting is how Netflix (NFLX) will play its cards. When it comes to original content and streaming, it is still the undisputed champion.
While the week was already looking positive, what really lifted the streaming giant was the Goldman Sachs announcement – it raised the NFLX price target by $100 to $490.
This is among the highest hike in the Wall Street, the bigger among the analysts covering Netflix. Goldman Sachs also predicts that the network will add 32.5 million subscribers versus a consensus of 26 million subscribers.
“We believe the growing content offering and expanding distribution ecosystem will continue to drive subscriber growth above consensus expectations. Based on the pace of both, we’re raising our revenue estimates and price target,” analyst Heath Terry wrote in a note to clients Wednesday.
This comes as a ray of hope for the streaming giant. Netflix earned the popularity that it enjoys by catering to the needs of the viewers with original content such that it spends way more on content and marketing than on technology. This also allows analysts to deal with the company on the same strata as other media companies.
There is also a downside to this problem: because of the heavy spending, the company is losing money. Netflix had $6.54 billion in long-term debt at the end of the first quarter and $17.9 billion in streaming content payment obligations. Analysts are also on the consensus that Netflix needs to plug its bleeding.
The 21-year-old company, infamously known for killing Blockbuster, is at the top of the online streaming, leaving its competitors in the dust. The competitions happening between the media companies will now create possible competition for Netflix.
Disney has announced that they would start their own streaming service for their original titles. Initially, the company plans to move its titles from other streaming services to its own, and stream their content exclusively in its own service.
Alone, Disney can’t dethrone Netflix. If the Disney-Fox merger falls through, it would result in Disney owning a majority stake in Netflix’s competitor Hulu. With Disney’s financial backing and original titles from Hulu, the streaming service can pose a challenge to Netflix. Comcast is trying to throw a wrench into Disney’s plan by making an even bigger bid for the Murdoch-owned 21st Century Fox. Now, that’s a battle we’ll have our popcorn out for. But hey, more entertainment for the world.