Posted By : Team SMI
Netflix’s market performance is believed to reflect subscriber growth couple with potential problems around Disney’s acquisition of 21st Century Fox.
Netflix surpassed Disney as the most valuable US media company on Thursday, a sign that Netflix’s subscriber growth, coupled with potential problems in Disney’s acquisition of 21st Century Fox’s TV and film assets, as well as changes in entertainment media consumption habits, are contributing to fundamental shifts in power.
Netflix’s stock is up 70% since January.
Netflix shares jumped energetically in Thursday morning trading and by 12.15pm local time in New York, the stock was up 1.9%, to an all-time high of $351.09 per share. That gave the company a market capitalization of nearly $162bn.
Streaming giant Netflix is riding high on news of a multimillion-dollar deal with Barack and Michelle Obama to use their newly created TV production house, Higher Ground Productions, to create shows.
The competition for creative talent has also been joined by Apple, Google and Amazon, each pouring billions of dollars into content production. That’s led to a sharp rises in costs – and a payday for talent – with traditional entertainment studios struggling to match Silicon Valley’s deep pockets.
The streaming giant today boasts more than 125 million subscribers across the globe and shows no signs of slowing down anytime soon.Looking ahead, some analysts believe that Netflix still has plenty of room for growth. As we highlighted last week, a recent research note from Bank of America analyst Nat Schindler argues that Netflix’s subscriber base could reach 360 million by 2030.Netflix Inc. has become as valuable as Walt Disney and Comcast, the latest sign that investors remain faithful to the handful of technology and internet firms that have long powered the broader market.The milestone for Netflix highlights investors’ interest in shares of rapidly growing firms they think will disrupt industries, a trend also seen with Amazon.com and the retail sector.
On 29th May 2018, Netflix for a few hours had topped Disney’s market cap, before shares of Disney pared some of their losses to put the Mouse House back ahead at the close of trading.
The market-cap horse race between Netflix and Disney matters because it shows that investors believe Netflix — even though its business is much smaller today — has as much upside going forward as the 94-year-old Walt Disney Co.
Netflix’s appeal to investors is its global reach and fast-growing streaming-subscriber base, which hit 125 million at the end of the first quarter of 2018. So far, the company’s bullish fans are comfortable with Netflix’s heavy content spending and cash burn, pinning their hopes on the prospect of future returns.
Meanwhile, there was speculation before Disney’s direct-to-consumer move (which included acquiring majority control of streaming-infrastructure company BAMTech) that the conglomerate might make an M&A play for Netflix. Netflix rose past Comcast’s market cap earlier this week. Last year, Netflix surpassed the market capitalization of Time Warner — target of AT&T’s still-pending takeover.