Amazon’s Chance to Buy Netflix?

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Amazon.com Inc. (NASDAQ: AMZN) posted an amazing quarter, which caused its stock to surge and lifted its market value to $300 billion. Among the businesses it lauded as a reason for its growth was Amazon Prime, which houses its streaming video business. It continues to have competition that may cap its growth rate. First on that list is Netflix, which is so large it dominates the streaming video business. Amazon is large enough and has a good enough balance sheet to jump ahead of all its competitors, if it could own Netflix Inc. (NASDAQ: NFLX).

Amazon’s market cap rose above $300 billion, and its stock reached nearly all-time highs, after it released its first-quarter results and forecast that its rapid growth would continue:

Net sales increased 28% to $29.1 billion in the first quarter, compared with $22.7 billion in first quarter 2015. Excluding the $210 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 29% compared to first quarter 2015.

Operating income was $1.1 billion in the first quarter, compared with $255 million in first quarter 2015.


Also:

Second Quarter 2016 Guidance

  • Net sales are expected to be between $28.0 billion and $30.5 billion, or to grow between 21% and 32% compared with second quarter 2015.
  • Operating income is expected to be between $375 million and $975 million, compared with $464 million in second quarter 2015.
  • This guidance includes approximately $825 million for stock-based compensation and other operating expense (income), net. It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

Amazon keeps the exact count of Prime subscribers a secret.

Netflix does not hide the count of its business. The company, with a market cap of $39 billion, posted revenue of $1.8 billion, dwarfed by Amazon’s numbers. Netflix had 81 million members, which has to be the envy of all its competitors. As for its near-term future, Netflix expects to add 2.5 million members in the second quarter.

One of Netflix’s problems is that to keep its position at the top of the industry, it has to invest in expensive original programming. As a part of a larger company, the costs of that business would be much less of a factor.

Amazon won’t take the top spot in streaming video worldwide unless it buys it.