Could Netflix Be An Acquisition Target?

The lower-than-expected subscriber numbers from Netflix, Inc. 1NFLX coupled with deceleration of near-term subscriber trends may trigger the M&A question from investors, with Apple Inc. AAPL rumored as a potential suitor.

But, analysts at BMO said it is unlikely.

"We don't expect this is mirrored internally as management remains focused on executing an ambitious 2016 expansion and only after that would consider strategic options, and we think even that is still unlikely," analyst Daniel Salmon wrote in a note.

Related Link: Wedbush Pounds The Table On Netflix Overvaluation, Maintains Underperform

Salmon noted that the second-quarter report and third-quarter guidance mostly fed the short-term bear case, as Netflix continues through a period of challenging visibility, including "new country launches gelling, gauging impact of un-grandfathering prices in North America."

The analyst, who has a Market Perform rating on the stock, prefers to stay on the sidelines with a more cautious than proactive stance. The analyst is still focused on the reception of local language content as a key variable for his thesis.

"While Netflix notes that local language content 'constitutes a small minority of viewing' we believe it has a higher likelihood than traditional, Western/Hollywood content to generate the positive word-of-mouth/local news coverage that could accelerate subscriber growth in a given country," Salmon elaborated.

Salmon cut his price target to $85 from $115, while Netflix shares slipped 13.98 percent to $85.00 at time of writing.

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