Netflix stock up on Amazon takeover talk: analysts
LOS ANGELES (Reuters) - Shares of Netflix Inc. (NFLX.O) rose sharply in a down market on Wednesday on speculation that Amazon.com Inc. (AMZN.O) would buy the online DVD rental company, analysts said.
Brian Pitz, at Bank of America Equity Research, said rumors of a deal of $34 per share, or a $2.1 billion purchase price for Netflix, were circulating in industry trade journals, but he added: "We believe a deal is unlikely."
A Netflix spokesman said the company does not comment on "rumors and speculation." Amazon representatives could not immediately be reached for comment.
Netflix shares closed up 5.7 percent, or $1.21, at $22.60 on Nasdaq. Amazon ended down 1.8 percent, or $1.36, at $72.29.
Andrew Wilkinson, senior market analyst at Interactive Brokers Group, also dismissed the takeover talk but said: "When we take a look at options volume, something is up at Netflix."
Netflix call volume looked aggressive due to takeover speculation, said Paul Foster, options strategist at Web information site theflyonthewall.com.
According to market research firm Track Data, 58,754 calls versus 11,033 puts traded in the company on Wednesday.
The heavy volume in the calls giving investors the right to buy Netflix at $22.50 a share by next Friday suggest investors anticipate an imminent announcement, Wilkinson added.
Those contracts closed at $1.05, up 85 cents on the day. But he figures much of the call volume of 18,928 contracts could have been the result of traders booking winning trades made earlier in the day.
Amazon has launched a movie download service and a UK online movie rental service, and once was rumored to be considering opening a U.S. DVD rental service to compete with Netflix and rival Blockbuster Inc. (BBI.N).
The two companies have held on-and-off talks over the years about selling online DVD rental subscriptions to Amazon customers and of other types of partnerships, and speculation about a merger periodically crops up.
"It seems that each six months a fresh apparent buyer comes to the fore for this video-rental company," Wilkinson said. "One has to wonder whether the company really is a good fit for someone like Amazon.com and whether they'd be prepared to pony up for such a large purchase -- it's just not in their style."
In a note to clients, Bank of America's Pitz said Netflix's network of distribution centers in 30 states could be an impediment to any deal between the two Web-based businesses.
The operations are essential to Netflix's pledge to deliver most DVDs in one business day but could be considered a "point of presence" that could require Amazon to charge state sales taxes in states where it does not have its own warehouses.
(Reporting by Gina Keating in Los Angeles and Doris Frankel in Chicago)
