Given Netflix’s Upside, Buyout Talk is Nonsense

-17.13%
Downside
605
Market
502
Trefis
NFLX: Netflix logo
NFLX
Netflix
Netflix Amazon

Source: Official Website of Netflix, Wikipedia

Adding fuel to the uncertainty around Netflix’s (NASDAQ:NFLX) stock, an analyst from Wedbush Securities recently speculated that Netflix’s decision to separate its DVD business could open doors for potential acquisition of the company by Amazon (NASDAQ:AMZN). Could this happen? Perhaps though we believe that Reed Hastings and Netflix want to remain independent. Dish Network (NASDAQ:DISH) recently made an offer of $1.9 billion for Hulu, an amount that equates to around 15% of Dish’s current market value, and so Amazon can certainly find $7 billion in its coffers, which equates to around 7% of Amazon’s $100 billion market value.

Now let’s look from Netflix’s perspective.

The company is in a high growth stage, despite hitting some road bumps in Q3 2011 where it expects some subscriber losses due to service and cost restructuring. Given the stock is currently depressed, we believe that that the stock will bounce back if the company shows solid growth in Q4 2011 and growth in its international business. The international growth potential is immense for Netflix.

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Let’s not forget Netflix has expanded internationally in Canada and Latin America and have seen good adoption. We agree that Netflix has taken a hit recently, but the fundamentals still remain solid and it’s is highly unlikely that a company with the opportunity and capacity to grow tremendously alone would look for a sale.

Our price estimate for Netflix stands at $195, implying a premium of about 50% to the market price.

See our complete analysis for Netflix’s stock.