Sometimes rumors make the rounds because they can put a little life into a stock. Other times the rumors spread because they're true. As of this writing, there's no confirmation which of the two scenarios is correct but the rumor that Amazon is looking to buy Netflix is out there nonetheless.
"There's heavy call buying and the stock is up on renewed takeover talk, with Amazon being mentioned specifically," Fred Ruffy, the senior options strategist at WhatsTrading.com, told Bloomberg."It's pretty typical of speculative call buying."
Netflix and Amazon.com are competitors in the area of movie downloads. Netflix does most of its business, however, with rentals of DVDs through the mail.
Wedbush Morgan Securities' analyst Michael Pachter told Bloomberg he didn't see Netflix as a fit with Amazon because it has distribution centers in states across the country. This would open Amazon up to having to pay taxes in those states.
"Suddenly in a whole bunch of states Amazon finds itself taxable," said Mr. Pachter. "It would kill their core business."
Amazon recently stopped doing business with affiliates in a number of states to avoid the tax issue.
Neither Amazon or Netflix would comment on the speculation.
Discussion Questions: Do you see a fit between Amazon and Netflix? Would the tax issue be enough to dissuade Amazon from trying to takeover Netflix?