Why Netflix Shares Soared


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online content streaming and DVD rental company Netflix (NAS: NFLX) jumped as much as 15% after announcing a content deal with the House of Mouse, Disney (NYS: DIS) .

So what: The movie-licensing deal Netflix and Disney signed today will give Netflix the exclusive rights to all Disney studio, Pixar Animation Studio, and Marvel Studio productions beginning in 2016, and brings a catalog of Disney classics to U.S.-based Netflix subscribers. Netflix can also begin delivering direct-to-video Disney releases beginning in 2013.

Now what: Today's deal is a much-needed boost for Netflix's streaming business, since its DVD business has been losing customers on a steady basis for many quarters now. Peer Amazon.com (NAS: AMZN) has been ramping up its online digital library and boasts a considerably larger cash balance, which makes negotiating content deals much easier. For Netflix, it'll need to negotiate more deals similar to this before I'd declare its growth trend back on track. For now, however, I consider today's pop the perfect opportunity for those who find themselves up on their investment to consider heading for the exits.

Will the Disney deal be just the beginning of a Netflix turnaround, or is this a temporary pop in a stock with little long-term business viability? Find out the answer to this question and much more by getting your copy of our latest premium research report on Netflix. Packed with in-depth analysis on the opportunities and threats facing Netflix - and complete with a year of regular updates - this report will give you the tools necessary to make smart long-term investing decisions. Click here to learn more.

The article Why Netflix Shares Soared originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Netflix, Disney, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Netflix, Disney, and Amazon.com, as well as creating a bear put ladder position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.