Investopedia/Shoshanna Delventhal: Microsoft May Buy Netflix: Media Analyst

Investopedia
Microsoft May Buy Netflix: Media Analyst
By Shoshanna Delventhal | May 8, 2018 — 1:14 PM EDT
Share
Add To Watchlist
MSFT
Microsoft Corp
97.70
-0.21%
NFLX
Netflix Inc
326.46
-0.95%
View Watchlist

Legacy tech titan Microsoft Corp. (MSFT) could look to make a blockbuster bid for Netflix Inc. (NFLX) as it attempts to push into the high-growth streaming business, according to one media industry analyst with over four decades of experience on the Street.

Veteran media analyst Porter Bibb of Media Tech Capital Partners made the bold prediction for Microsoft to acquire Netflix on CNBC's "Squawk Box," suggesting that buying the on-demand video streaming giant makes sense for the global IT provider, which currently does not have any content. "They're moving as fast they can into the cloud business. They don't have any direct to the consumer content delivery," said the managing partner.

Netflix has been highlighted as one of the most expensive picks in an already pricey tech space. The FAANG component has seen its shares skyrocket nearly 70% year-to-date (YTD) and a whopping 108% over the most recent 12 months, far outperforming the broader S&P 500's roughly flat trade and 11.3% return over the same respective periods. By comparison, the Nasdaq Composite Index is up 5.2% YTD and 19% over 12 months. NFLX is trading at a price to earnings multiple of 219.5, compared to the average company in the Nasdaq Composite Index with a P/E ratio of 32.1. NFLX trades at a forward 2018 P/E ratio of 107.5. (See also: Netflix Skyrockets on Higher Subscriber Growth.)
NFLX Could Put MSFT's Cash to Good Use

While Netflix, with a market capitalization around $139 billion, may seem like an odd takeover target for the Redmond, Washington-based tech giant, Microsoft has been highlighted as being among the tech giants sitting on a mounting pile of cash ready to be put to use. Microsoft's deep pockets could prove valuable for the Los Gatos, California-based streaming platform as it ramps up its spending on original content, projected to reach as high as $8 billion in 2018, as the firm wards off competition from players such as Walt Disney Co. (DIS), Hulu and Amazon.com Inc. (AMZN).

Old-guard tech titan Microsoft, with a market cap of $739 billion, has seen its stock jump near 12% YTD and 38.8% over the year, boosted by quarterly profits that beat the Street's forecasts and fueled the bullish outlook for MSFT's hybrid cloud platform Azure as it heads off against Amazon Web Services and Alphabet Inc.'s (GOOGL) Google Cloud.

Bibb's prediction comes amid chatter in the media space regarding a potential M&A shakeup. CNBC reports that Comcast Corp. (CMCSA) is expected to make an all-cash bid for Twenty-First Century Fox Inc.'s (FOXA) entertainment assets if the White House approves AT&T Inc.'s (T) bid for Time Warner Inc. (TWX.) (See also: Microsoft CEO: Our Cloud Will Beat AMZN, GOOG on Customer 'Trust'.)
Related Articles

    Investing
    Netflix Stock Breaks Out Amid Giant Disney-Fox Deal
    Netflix shares rallied on the news that Disney will acquire Twenty-First Century Fox's entertainment assets.
    Investing
    Netfli on Track for Q4 Beat: Piper Jaffray
    Despite subscription price hikes, US consumers can't get enough of the video streaming platform.
    Investing
    Buy Netflix as it Widens Lead: Wells Fargo
    Analysts acknowledge heightened competitive pressure in the on-demand video streaming service space.
    Financial Advisor
    The Biggest Risks of Investing in Netflix Stock
    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
    Investing
    Assessing Netflix Post-Earnings Valuation (NFLX)
    Netflix has a consensus Buy rating and a 12-month price target of $122, suggesting that Wall Street believes the stock is now where it belongs.
    Investing
    Is It Too Late to Get Into the Netflix Frenzy? (NFLX, GOOG)
    Explore the current state of Netflix and the question of whether its sharp rise in share price over a two-year period means it is too late to buy the stock.
    Investing
    Why Netflix Is Still Cheap Despite 30% Gain In Three Weeks
    Netflix stock could still rise further given its growth outlook and past success.
    Investing
    Netflix: 7 Secrets You Didn't Know (NFLX)
    Learn some little-known facts about Netflix, including its near buyout by Blockbuster and why it chooses not to use square envelopes for its discs.
    Investing
    The Rise of Netflix (NFLX)
    Video streaming giant Netflix has certainly come a long way since starting as a mail-order movie rental service in 1997. The company went public in May 2002 and has shot up an overwhelming 4,1 ...
    Investing
    Making Sense of Netflix's Balance Sheet
    Understand how to assess Netflix's performance based on the major components of its balance sheet.

STOCKS:
MSFT, NFLX
Trending

    The Dummies' Guide To The Iran Nuclear Deal
    What You Should Know About Net Neutrality
    A Stock Sell-Off Vocabulary Guide
    Understanding Interest Rates, Inflation And Bonds
    Everything You Need To Know About Earnings

    Work With Investopedia
    About Us Advertise With Us Contact Us Careers

© 2018, Investopedia, LLC. All Rights Reserved Terms Of Use Privacy Policy