For Sale?

A Wall Street analyst predicts Netflix’s recent announcement to separate itself from its DVD-by-mail rental service (now run independently as ‘Qwikster’) is the first step in selling its online streaming business to Amazon.com.

Michael Pachter, of Wedbush Securities raised his buy rating on Netflix stock, claiming the company could be on the verge of a lucrative sale of its increasingly-important streaming business to the online retailer:

Pachter said that Amazon has always wanted to be in the video-streaming business, but has been hampered by tax considerations due to state sales tax issues. Most states require companies that have physical operations in those states to collect sales taxes on transactions done within those states.

Amazon has so far been able to get around most of those sales-tax issues by virtue of its being an online retailer. Pachter said Amazon would likely have had to begin collecting state sales taxes had it purchased Netflix outright because that company has a wide network of distribution centers across many states.

However, Pachter said a separate video-streaming business from Netflix is more appealing to Amazon, as the company could still avoid enforcing the state sales taxes, and dramatically increase its own video offerings.

“If Amazon were to acquire only Netflix’s streaming business, it could triple the size of its content library, and gain traction as an industry leader,” Pachter said. “Netflix’s streaming has current content deals that provide it with access to movie content during the premium cable TV window, and Amazon has the financial resources to secure additional streaming rights.”

But not every analyst is convinced Pachter is on the right track.

Brett Harriss, an analyst with Gabelli & Co. in Rye, New York, told Bloomberg News that potential buyers are more likely to wait until Netflix gets cheaper before making a bid.

“At some point, this does get cheap,” Harriss said in an interview. “But I don’t think we’re down there yet.”

Other analysts think the concept of a sale is correct, but the buyer is all-wrong.

“The name that would pop in my mind first is Google,” Tim Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group LLC in Bedford Hills, New York, told Bloomberg. “Google loves to throw money at ideas and companies that they think have the potential to be game changers and become major players.”

[flv]http://www.phillipdampier.com/video/CNBC Netflix Feeding Frenzy 9-21-11.flv[/flv]

Netflix Feeding Frenzy: The vultures are circling as analysts on CNBC pound Netflix’s recent price and service plan changes as this compilation of reports illustrates.  (18 minutes)