Clients kept asking Bernstein's Todd Juenger whether Disney should buy Netflix so the media analyst decided to write an analysis of such a deal despite the fact there are no reports suggesting any partnership is being contemplated by either party.
In this purely speculative missive, the analyst says he would be open to the deal, which he calculates would cost Disney $70 billion. Juenger writes:
"Our initial reaction to almost any proposed acquisition is skepticism. In this case, we're talking about a huge ($70bn?), dilutive, transformational event. And to the extent Disney accelerated the success of the company being acquired (which is usually the point of an acquisition in the first place), the faster it would cause the demise of Disney's core TV network businesses. But then we reminded ourselves — we believe the demise will happen anyway. From that POV, it is better, then, to own the winning solution. Imagine the appeal of a Disney/Netflix-branded SVOD service. Some argue Netflix would even bring with it the next Disney CEO."
After being the market's darling momentum stock for years, Netflix shares are up just 2 percent in 2016 through Wednesday as investors broadened out their interests beyond the infamous "FANG" stocks to industrials and banks. Disney has fared worse, however, with the stock down more than 7 percent this year through Wednesday on subscriber losses at its cable networks like ESPN. Netflix's market value is about $50 billion while Disney's is triple that.
The analyst believes the essential question is whether Disney is better off competing with Netflix by building its own platform or spending $70 billion to buy the content-streaming leader.