Will Amazon bid for Netflix?

Netflix (NFLX) stock moved up seven percent yesterday on rumors that Amazon (AMZN) might buy the video rental company. The deal, should it happen, makes a lot of sense.

Netflix has a market cap of $2.4 billion and trades at just 1.7 times sales. Amazon's market cap is $35 billion, or 1.8 times sales. The market looks at the relative value of the two companies as being fairly similar. Amazon has enough cash on its balance sheet to write a check to buy Netflix.