Netflix Shares are Jumping on Alibaba Takeover Speculation

netflixNetflix, Inc. (NASDAQ:NFLX) shares haven’t participated in the wider market’s rally over the past year, but the M&A catalyst is always lying in wait, ready to pop the stock.

Rumors circulated once again on Friday morning, continuing a long string of such speculation about a potential suitor for the streaming media giant. Today, traders are chattering that Alibaba Group Holding Ltd (NYSE:BABA) is sniffing around, but that doesn’t make much sense for several reasons:

  1. Netflix has had a lot of trouble entering the Chinese market, which is notoriously unfriendly to U.S. media companies.
  2. BABA launched a streaming video service of their own last year.
  3. Netflix has reportedly already been working with China’s LeEco to try and get its service into Chinese markets.
  4. Netflix is a $40B+ company, so BABA might have trouble even financing a deal.
  5. Synergies between the two companies are almost non-existent.

From a technical standpoint, Netflix has been doing a bit better as of late. The stock recently crossed above its 50-day simple moving average (SMA), which has spurred some additional buying. But its performance still lags its peers and the overall market as growth concerns become more and more of an issue.

Netflix shares rose $3.26 (+3.49%) to $96.70 in Friday trading. NFLX has fallen -15% year-to-date, badly trailing the +6.5% performance of the benchmark S&P 500 during the same period.

NFLX-2016-08-05

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