I'm a longtime fan of Netflix (NFLX +0.02%), both as a service and as a stock. In the long run, I expect Netflix shares to deliver multibagger returns, even from today's rising buy-in prices. But sometimes the stock's price jumps surprise me -- Netflix gained more than 6% on Monday, and reasonable catalysts were nowhere in sight.
The company wasn't entirely devoid of news. Netflix just signed an exclusive multiyear deal with News Corp (NWS +0.00%) subsidiary 20th Century Fox Television, which brings hit comedy New Girl to U.S. customers with an unusually short delay. Season 1 is available today; upcoming seasons will run on Netflix as soon as the Fox run ends. Compare and contrast to the usual model, where Netflix has to wait until one year after the season finale.
The latest addition to Netflix's American content catalog, starring Zooey Deschanel and Jake Johnson. But mostly Zooey Deschanel. Image source: Fox press materials.
New Girl is an award-winning audience favorite, and anything that brings more of ultimate MPDG Zooey Deschanel to my living room is a good thing. But this is hardly a game changer, worth a 6% overnight premium on Netflix shares. In particular, I'd be more impressed if this deal covered global rights, but Netflix customers in South America and Europe are out of the loop this time.
In other news, analyst house Morgan Stanley upgraded Pandora Media (P +0.00%) to a buy. Why would that change Netflix shares in any way? Because Morgan Stanley explained its bullish view of Pandora by comparing it to Netflix in a very flattering light.
"We believe Pandora is establishing itself as the 'Netflix (NFLX +0.02%) of Radio,'" said analyst Scott Devitt. That means being "a truly disruptive form of content consumption that offers investors the best pureplay exposure to the secular shift of broadcast radio dollars to online channels."
Kind words indeed. Pandora shares jumped as much as 10.2% on this upgrade. I suppose you could connect the dots and land at the conclusion that Morgan Stanley obviously loves Netflix just as much. Devitt's view of Netflix is due for an update, being unchanged since setting a $200 price target back in February.
But is that backhanded connection strong enough to boost Netflix shares by 6%? I think not.
Like I said, I believe that Netflix is undervalued from a long-term perspective. But there's no particular reason for Mr. Market to adjust his price tag on the stock this much right now. And you can't even chalk it up to some big-volume buy behind the scenes, as the trading volume was actually lower than recent averages.
Enjoy the ride, fellow Netflix owners. The big, truly investable news will come when Netflix reports second-quarter results in about three weeks. This Monday's sound and fury signifies nothing.
