Why Netflix Could Fly Even Higher

 | Jan 24, 2013 | 7:07 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

nflx

,

aapl

"They need Netflix (NFLX) as much as Netflix needs them." And with that line, you saw one of the major reasons that Netflix took off today, not just because of the 8% increase in subscribers, even if they are pure profit.

Right now, the biggest hits on television are serial productions for outfits such as AMC and FX. "Mad Men," "Sons of Anarchy," "Justified," "Breaking Bad," you name it, that's what people talk about, that's what they watch.

We know that the broadcast networks don't like serials or arcs. They want to able to plug and play any episode out of order -- think "Seinfeld" or "Law & Order."

But the real heavyweight stuff that's getting the great numbers, like "Walking Dead," can't be watched plug and play. They have to be watched in order, so you can't just jump right in.

Enter Netflix. As Reed Hastings said on the call, the makers of "Breaking Bad" and "Mad Men," two examples he called to mind, need Netflix so that people can catch up by bingeing. It empowers these small networks, and it actually makes them more valuable, not just Netflix.

That, plus the new tablets and the ease of streaming, including the button on many new TV clickers, explains the resurgence here.

And it is impressive.

Which got me to thinking how obvious it is that Apple (AAPL) has to buy Netflix. Instantly, Apple would become the destination for new TV. Instantly, Apple would be the de facto cable company for youth that doesn't want to have to wait until Thursday night at 8 for their program.

And instantly, people would binge and get started on new sets of shows effortlessly while being a friend to those who make that content. It can make content itself or augment the content that Netflix is buying. With 28 million subs who want to watch on their "phablets" -- smartphones and Tablets -- a loaded Netflix app may be the best way for Apple to rekindle the affections of young people.

Small amount of money for large binge-watchers and their friends. Something that would send Apple's stock up maybe 10% when it did it, or maybe, given how oversold this one is, even more.

Sure, Netflix has doubled.

But, like Apple, it used to be much higher. This can be as easily justified as watching the new season of "Justified"! 

Columnist Conversations

We are currently testing the key resistance decision in ICE. Do not consider an entry without a trigger!! ...
Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
EA reported June revenue of $775 mlm vs. $714 est. much better than expected. EPS of $0.19 blew away the St es...
BIDU still has some higher targets, but it's a good idea to TRAIL UP stops when you EXTEND the prior swings. ...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.