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Disney Buying Netflix Would Solve Problems, Greenfield Suggests

Walt Disney ( DIS ) could solve a couple of problems if it acquired streaming video leader Netflix ( NFLX ), maverick Wall Street analyst Richard Greenfield said Friday in a blog post. Disney CEO Bob Iger is facing two big concerns: succession planning and the erosion of its ABC and ESPN broadcast businesses, Greenfield said. Iger is scheduled to retire in 2018, but he is without an heir apparent after the surprise departure this week of Chief Operating Officer Thomas Skaggs. Meanwhile, the company’s cable and broadcast businesses are facing a loss of viewers who are shifting more to on-demand Internet video services like Netflix. ESPN in particular is in trouble because it overpaid for NBA and other sports broadcast licenses before subscriber losses from cord-cutting became apparent, Greenfield said. Acquiring Netflix would give Disney a foothold in on-demand video distribution and a future leader in Netflix CEO Reed Hastings, Greenfield said. “Netflix is already a great friend of Disney,” Greenfield said. “In fact, Iger has repeatedly acknowledged how they are in part responsible for Netflix’s success. … Disney continues to sell more and more content to Netflix spanning movies and television series, while at the same time struggling to get their own direct-to-consumer content business off the ground in the U.K.” Netflix wouldn’t come cheap. The firm has a market capitalization of $44 billion vs. $157 billion for Disney. And Greenfield wonders whether Disney’s board would make such a bold acquisition. “We doubt Disney’s board comprehends just how much trouble their broadcast/cable network assets are facing to seek a transaction so near-term dilutive as Netflix, especially given the incredible success they are having contentwise in 2016,” he said. If Disney acquired Netflix, it could offer subscribers a bundle of on-demand video from Netflix and live sports from ESPN. “Combining Disney and Netflix effectively re-creates the best of the legacy video bundle, removes the distributor, packaging together great content with best-in-class technology spanning all devices consumers love to use,” he said. In midday trading in the stock market today , Disney was down a fraction, near 96, and Netflix was down more than 1%, near 103.

Apple Should Be Valued Like Internet, Not Hardware, Company

Apple ( AAPL ) is grossly undervalued because investors wrongly treat it like a computer hardware company, Needham analyst Laura Martin said in a research report Tuesday. Martin initiated coverage of Apple with a strong buy rating and a 12-month price target of 150. Apple stock fell 1.2% to 109.81 on the stock market today . Based on four different valuation methodologies, Apple’s long-term value is 180, or 64% above current levels, she said. “For each of the past five years, Apple’s profit margins have been higher than Disney ’s ( DIS ) and its asset productivity (i.e., earnings per asset employed) have been higher than Facebook ’s ( FB ),” Martin said. Apple “should not be valued like a hardware company if its fundamentals are better than world-class content and Internet companies.” If Apple were valued as a top content or Internet company, its shares likely would trade at 200, she said. Apple’s business also is similar to a cable company’s recurring subscription model, she said, and Apple’s iPhone customers are predictably loyal and upgrade to the latest smartphones roughly every two years. If Apple was valued at an average cable company multiple today (even though Apple has a far less capital-intensive business model), Apple would trade at 180, she said. Under Needham’s worst-case scenario, where Apple has 1 billion active devices and zero unit growth for the next 20 years, the stock still should be valued at 168, she said. RELATED: Apple Stock Rises On Upbeat Analyst Reports, Video Services Upside

Disney Leads 3 Big-Name Media Stocks Making Notable Moves

Loading the player… Let’s take a look at three media-related stocks making notable moves Tuesday: Walt Disney ( DIS ), Twitter ( TWTR ) and Netflix ( NFLX ). Disney was dropping more than 2% in heavy trade on the stock market today after announcing late Monday that Chief Operating Officer Thomas Staggs will be leaving his current position, effective May 6. He’ll stay on as special advisor to the CEO through the fiscal year, which ends in October. But investors are concerned because Staggs was set to take over the chief executive position from Robert Iger in two years. The gap down came in big volume and sent shares back to their 50-day line, where the stock is now trying to find support. Disney is trying to recover from a steep decline, triggered by ESPN subscriber losses, which put shares nearly 30% below their November peak. The stock is now trading about 20% below its high reached last August. Twitter To Stream NFL Games Twitter won rights to live-stream 10 Thursday Night Football games, which will also be broadcast on network TV channels. Verizon ( VZ ), Yahoo ( YHOO ) and Amazon ( AMZN ) were bidding for the rights too, according to Bloomberg. Facebook ( FB ) also had a bid but pulled it last week. Twitter shares were trading slightly higher in heavy turnover. The stock initially rose and then reversed lower in choppy action. Shares were able to retake the downward-sloping 50-day line in Monday’s session and were trying to find support there Tuesday. Twitter is 67% below its 52-week high. Meanwhile, Facebook rose fractionally intraday, Amazon and Verizon fell less than 1%, and Yahoo lost 1.9%. Netflix Reports Earnings Soon Netflix is due to report its first-quarter results in less than two weeks, on April 18. Analysts expect earnings to drop 64% as costs rise. Revenue is projected to increase by 25%. In May, the price of a Netflix subscription will go up by $2. UBS said in a report Monday that the price hike will translate to a low churn of 3% to 4% over the second and third quarters, as Netflix has strong pricing power. The analyst sees a total of 450,000 net U.S. subscriber additions in Q2. Netflix is rising 0.2% in above-average volume, but it’s still hitting resistance at its 200-day line. Shares lost support at that level around the time of Netflix’s last quarterly report. The stock is trading 21% below its December high. Image provided by Shutterstock .