Updated from 8:19 a.m. EDT

Netflix

(NFLX) - Get Report

caught a big premarket bid Thursday after

Wal-Mart

(WMT) - Get Report

folded its DVD-by-mail rental operation and agreed to push existing subscribers toward its former rival.

Netflix added as much as 32% in premarket trading. Its shares came down slightly after the company issued a second press release saying the agreement wouldn't result in an immediate revision to its financial or subscriber guidance. The stock was last up $2.90, or 19%, to $18.40.

Still, Wal-Mart's capitulation helps rebut a key pillar of the bear case against Netflix, which held that its $17.99-a-month service is too easily replicable by deeper-pocketed competitors. Wal-Mart, which charges about $13 a month, will continue selling movies over the Internet, a business it says remains brisk.

"As movie sales at Walmart.com continue to accelerate, the company is strengthening its commitment to this core business, and as a result, is discontinuing the Wal-Mart DVD rentals service," Wal-Mart said in a joint release. The company's existing rentals customers will be offered the option to become Netflix subscribers at their current Wal-Mart rate for a year.

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The surge in Netflix shares continues a steady rise that began at about $9 in late March. The stock has benefited from intermittent and never-confirmed takeover speculation, with

Blockbuster

(BBI) - Get Report

and

Amazon

(AMZN) - Get Report

usually floated as potential suitors.

The shares remain well below their 52-week high of $36.57, touched last June.

Netflix reported an $8.8 million loss in its first quarter and previously said it expects to lose as much as $7.2 million in the current period. For the year, Netflix has pegged its expected loss at $5 million to $15 million on revenue of $660 million to $685 million.

The company claimed about 3 million subscribers at the end of the last quarter.