Netflix (NFLX) Jumps on Cable Company Deal Rumors

Netflix (Nasdaq: NFLX) was up more than 3% earlier this morning on rumors that the online video giant is in talks with some major U.S. cable companies to potentially add its streaming movie services to their cable offerings. The deal would expand the tech stock’s footprint into an area that heretofore has been one of its chief rivals.

According to Reuters, a Netflix deal with a major U.S. cable company could mean Netflix would be available as an on-demand option for cable subscribers. A deal could be in place as early as the end of this year, at least one cable operator told Reuters.

Should a deal come to fruition, it would be a major boost for the tech stock. At $110 as of 10 this morning, Netflix shares are barely one-third of the $304.79 price they were selling for in mid-July.

The stock plummeted as low as $63 a share in late November after a series of missteps by owner/founder Reed Hastings. It has since rebounded, buoyed in part by better-than-expected fourth-quarter earnings. But the stock is still just a shade of what it was nine months ago.

Getting back to $300 a share may be unrealistic. Netflix was grossly overpriced at that level. Even now, the stock is still trading at 26 times trailing earnings.

But the stock has plenty of upside considering Netflix is the leader in both the video-by-mail and streaming video business, and is still in the early stages of expanding internationally. A deal with a cable company could open up a whole new avenue for growth.

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