Netflix (NFLX) Breaks Downtrend on Dreamworks Deal

By Jeffrey Moraes, T3Live Jun 17, 2013, 5:12 PM 

Netflix (NASDAQ:NFLX) is making waves across the market today after the streaming video service announced a major new deal with DreamWorks Animation (NASDAQ:DWA). The deal will allow both companies to develop original shows based on hit films such as Shrek, Madagascar and Kung Fu Panda. This multi-year deal is reported to include 300 hours of original content, mostly of which will be catalog-type shows. Although the dollar value of the deal is unknown at this point, it is widely though to be the biggest deal Netflix has signed of this nature.

This deal comes in at a perfect time for Netflix, which is trying to regain the adolescent demographic it lost when it opted out of a deal with Viacom in May. Viacom offered popular children’s shows like Sponge Bob and Dora the Explorer through the internet streaming service. “The content … should in part help to offset the gap in Netflix’s children’s content schedule created when it decided not to renew its agreement for certain content from Viacom’s Nickelodeon Network earlier this year,” said Michael Pachter, an analyst who covers Netflix for Wedbush Securities.

Netflix stock reacted positively to the news, spiking $12 dollars in the pre-market. Netflix has added to those pre-market gains during today’s session and as of 3pm ET is up 6.45% on the day. Today’s gap up also triggered a break out of the month-long downtrend that has been controlling the stock since May 16th. With a heavy short interest, if NFLX can continue to hold this gap and build a higher base, you could see another leg higher.

Netflix will premiere the new DreamWorks shows in all territories where it operates, with the first of the new announced series expected to be available in 2014. DreamWorks’ shares were up 3.77% percent at $23.68 late in the trading day.

Disclosure: No relevant positions

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