Netflix Rallies on Rumours Of Buyout By Apple

Netflix Rallies on Rumours Of Buyout By Apple

 
The stock of streaming video provider Netflix, Inc. (NASDAQ: NFLX) has gained nearly $14 in the past two trading sessions. The stock was upgraded to “Outperform”, from “Neutral” by Macquarie. The investment research firm also raised the price target to $220. That was only one of the reason for the rally. As explained below, there is a takeover rumour surrounding the stock. Thus, we expect the stock to remain bullish as the market is likely to follow the adage “Buy the rumour, sell the news.” Netflix ended yesterday’s trading session at $205.05.

While upgrading the stock, Tim Nollen at Macquarie Research stated that Netflix is far ahead of others, both in programming hours and quality of the original content. Nollen believes that the situation is not going to change as of now. Further, according to Nollen, Netflix will reach 60% original content by 2020. That will save $2 billion in licensing fees for the company.

To sum it up Nollen said “Netflix has changed the way people watch TV, and is now pushing further into film. Consumers’ increasing lack of tolerance for advertising drives them to subscription OTT services.”

Meanwhile, Citigroup analysts rekindled rumours that Netflix could be a takeover target of Apple. In a research report sent to clients, Citigroup’s analysts Jim Suva and Asiya Merchant have written that the tech giant is planning to acquire a car manufacturing company, an entertainment company, or a video game company, and Netflix is the prime target right now.

To support their argument, the analysts said the US tax reform bill, which was passed a few days before Christmas, will encourage Apple to make use of the one-time tax concession and repatriate the $252 billion cash held overseas. The analysts are giving a 40% chance for the acquisition deal to happen. Citigroup has included Disney (DIS), Tesla (TSLA), Electronic Arts (EA), and Activision Blizzard (ATVI) in the list of other takeover prospects. Neither Apple nor Netflix has commented on the subject. However, the stock is expected to climb up on this report.

Technically, the stock has broken the resistance at 200. Further, the momentum indicator is making new highs. Thus, we expect the stock of Netflix to remain in an uptrend.

Netflix - Technical Analysis - 4th January 2018

To trade the bullish rally, we are planning to pick a call option offered by one of well known binary brokers listed here. We may invest in the option only if the stock of Netflix trades near $202 in the NASDAQ. Additionally, the binary broker should offer a contract valid until Jan 12th.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.


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