Shares of Netflix (NASDAQ: NFLX) popped today, likely after two days of rumors that the company could work with other technology companies to get an ad-supported streaming service off the ground.
The video streaming stock was up by 5.3% as of 1:52 p.m. ET.
First, investors may be driving Netflix higher today after an AdAge report yesterday said Netflix may partner with Alphabet‘s Google to forge an advertising partnership.
Netflix is looking for new ways to increase its subscribers and the company has previously said that an ad-supported streaming tier is in the works. Partnering with Alphabet would be a logical choice, considering the company owns one of the largest digital advertising platforms.
Investors may have already been considering the possibility of the Alphabet partnership and paired it with comments made by Needham analyst Laura Martin yesterday about Netflix potentially tapping Roku to promote its ad-supported service.
Martin said in an investor note yesterday that Netflix “must buy more Roku ad units to tell the largest base of streaming customers what new content is coming to NFLX and why they should watch it.”
Roku has a significant global reach — with 61 million devices around the globe — that could help Netflix reach consumers who are looking for an ad-supported streaming service.
With Netflix getting attention over the past couple of days about potential partnerships with Alphabet and Roku, it’s not surprising its stock is gaining ground today. It’s worth mentioning though that nothing official has been announced by any of the companies.
Netflix shareholders will want to keep a close eye on any new development about the company’s ad-supported tier, especially as rising inflation could cause some consumers to look for cheaper video streaming options.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Netflix, and Roku. The Motley Fool has a disclosure policy.