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Why Netflix Might Be Able To Redeem Itself In Q1

Netflix ( NFLX ) shares are now starting to make a comeback after the news that its fourth-quarter U.S. subscriber growth missed expectations. The stock fell as much as 22% in the weeks following the news, despite strong overall subscriber additions. But with a new Baird survey pointing to “solid” U.S. subscriber results in Q1, Netflix may be able to redeem itself come its next quarterly report in about two weeks. Baird said that the strong Q1 U.S. subscriber numbers can be attributed to the recent launch of new seasons of successful Netflix originals including “House of Cards” and “Daredevil.” Shares are climbing 3% in volume that’s tracking a little lighter than average Tuesday. The stock retook its downward-sloping 50-day line earlier this month and is now approaching the 200-day line. Netflix dropped below that level in the wake of the report of its weak Q4 subscriber growth. For Q1, analysts expect earnings to fall 20% amid rising costs, while revenue jumps 25%. Netflix is seen as the leader in video streaming, with an expanded global rollout announced in January. But it’s facing increasing competition as others start to take advantage of the cord-cutting trend. Competitor Hulu, a joint venture among Disney ( DIS ), Comcast ( CMCSA ) and 21 st Century Fox ( FOXA ), is starting to create its own original content. Hulu and Netflix have both recently launched virtual reality apps that work with Samsung Gear VR, powered by Facebook ( FB )-owned Oculus. The high-end Oculus Rift headset began shipments this week. Disney was up 0.2% Tuesday, Comcast added 0.9%, and Fox was essentially flat. Facebook climbed 2.1%.

Microsoft Reportedly Among Those In Yahoo Acquisition Mix

The process of finding a buyer for struggling Web portal Yahoo ( YHOO ) is reportedly in the middle of its first round, and interest is high, according to a CNBC report , which cited sources close to the matter. This comes after a separate report said Microsoft ( MSFT ) might put up “significant” financing in a bid for Yahoo. Microsoft executives are in talks with potential investors about providing funds to buy the troubled Internet company , Re/Code reported. A Reuters report said those talks are in the early stages. Microsoft and Yahoo have a longstanding search and ad partnership, and Microsoft is focused on preserving that relationship, it said. Private equity firms interested in Yahoo have approached Microsoft, Reuters said. Microsoft declined to comment. Microsoft has been meeting with private-equity firms and saying it might lend “significant” financing in a bid for Yahoo, according to Re/Code . In 2008, then-Microsoft CEO Steve Ballmer tried to buy Yahoo for about $45 billion. Yahoo’s overall market cap is now $33 billion, but that includes its its major stakes in China e-com leader Alibaba Group ( BABA ) and in Yahoo Japan. Minus those holdings, analysts have pegged the price of Yahoo’s core business at $6 billion to $8 billion. Excluding its 15% stake in Alibaba, Rosenblatt analyst Martin Pyykkonen said in an industry note last week : “Yahoo’s current market cap implies $3.3 billion valuation for the core business and the Yahoo Japan stake. We think the fundamental outlook for Yahoo as a ‘growth’ stock is continuing to erode, especially in light of strong secular trends which are benefiting the likes of Facebook ( FB ) and Google owner Alphabet ( GOOGL ), both of which have more revenue concentration from mobile advertising.” Possible Yahoo Buyers Said To Include AT&T, Verizon Re/Code said that Yahoo started engaging with “strategic” bidders that include AT&T ( ATT ), Verizon ( VZ )and Comcast ( CMCSA ), with private equity and other investment firms to come next, the report’s sources said. Interested parties reportedly include Advent International, Vista Equity Partners, TPG and KKR ( KKR ). Verizon Chief Financial Officer Fran Shammo said in December that the U.S. wireless carrier could look at buying Yahoos’s core business if it were a good fit. Activist investor Starboard Value announced Thursday that it wants to sweep out all of the ailing Web company’s nine directors and replace them with its own slate during Yahoo’s 2016 shareholder meeting. This month, Yahoo appointed two members to its board: Catherine Friedman, a former managing director at Morgan Stanley ( MS ), and Eric Brandt, a former chief financial officer at Broadcom ( AVGO ). “This is gearing up to be an epic proxy fight, and we believe that this will create a significant overhang on Yahoo shares,” said Mizuho analyst Neil Doshi in an industry note on Thursday. “It’s unusual to see an investor try to replace an entire board, but this clearly highlights to us that Starboard does not trust any of the existing board members will do what needs to be done to create value for Yahoo shareholders.” Yahoo Chief Executive Marissa Mayer has struggled to turn the company around in her nearly four years as Yahoo’s leader. Yahoo stock was up 1%, near 35, in afternoon trading in the stock market today .

Facebook, Google, Amazon May Be Caught Up In Netflix Regulatory Flap

Netflix ’s ( NFLX ) revelation that it has reduced the quality of video streaming to the wireless customers of AT&T ( T ) and Verizon Communications could complicate Web regulatory issues for Internet giants such as Alphabet ’s ( GOOGL ) Google, Facebook ( FB ) and Amazon.com ( AMZN ), says a Guggenheim Partners analyst. Netflix last week fessed up to throttling video to AT&T and Verizon ( VZ ) customers for several years, but not to the wireless subscribers of Sprint ( S )or T-Mobile US ( TMUS ). Netflix says it lowered video quality to protect its own customers from exceeding the monthly data caps of AT&T and Verizon. Sprint still offers unlimited data plans while T-Mobile typically slows network speeds rather than imposing overage fees, said a report. Paul Gallant, an analyst at Guggenheim, says Netflix’s policies do not violate federal “net neutrality” rules, which bar Internet service providers from throttling, blocking or prioritizing Web traffic. The rules apply only to ISPs, not Internet firms, noted Gallant. The Federal Communications Commission in February, 2015 expanded net neutrality rules to wireless networks for the first time. A federal court is expected to rule on a legal challenge to the FCC’s new net neutrality rules in April. “Getting ‘caught’ doing this may put Netflix on its heels in Washington at a time when important (Internet) policies like interconnection pricing and zero rating are fluid and could go either way,” said Gallant. T-Mobile and Comcast ( CMCSA ) have adopted video policies referred to in the telecom industry as “zero rating” because streaming does not count toward monthly data caps and there are no payments involving content partners. FCC chairman Tom Wheeler has pushed for competition between Internet video providers, also called over-the-top (OTT), and the pay-TV industry. “ISPs have long complained that they are being unreasonably singled out for regulation within the Internet ecosystem. This Netflix report may highlight for government officials the leverage possessed by large Internet companies,” added Gallant. “Slowing streams to specific wireless (users) implies a range of steps a large edge provider could take to disadvantage an ISP relative to its competitors. With video becoming a rising priority of Internet giants like Google , Amazon, and Facebook , the issue of interconnection fees and zero-rating services will remain important battlegrounds — with the current FCC actively supporting OTT-based competition.” Image provided by Shutterstock .