Which is the Better Buy: Disney or Netflix?

28 Mar, 2020 Gloria R. Wilson No Comments

The coronavirus has had a very different effect on Disney and Netflix. The iconic entertainment and amusement park company have been forced to shut down its parks, where it derives 35% of its total revenue. The spread of the virus has also halted its studio productions and TV operations. By contrast, Netflix, the streaming service, is only down 4%. Their production has taken a hit, but surge in demand for home entertainment means the pandemic actually benefits the company.

Netflix: Stable But Not Growing Anytime Soon

Things are definitely looking down for Disney, particularly in relation to the expectations set by their new streaming service Disney+. Asking people to add an expense in a time of uncertainty is difficult. But for Netflix, subscriptions are already ubiquitous in the U.S where almost half of U.S. households already subscribe. Many smart televisions even come with a Netflix icon on the home screen. The company just doesn’t have much more room to grow in the U.S. Last year, their number of subscriptions grew by a measly 4%. Internationally, company growth may be limited by the expected global recession.

Although Netflix is getting more exposure and more views, they can’t really capitalize on it. Netflix offers a flat rate subscription service, so just because people are spending more hours on the site, doesn’t mean they’re paying more to the company.

Disney: Cheap And Has Potential

Disney has been hit way harder than Netflix because of the pandemic. Earnings for the first quarter are going to be down significantly. Disney stock has fallen 25% just since March 9th. Still, the company is sitting on a golden goose of Hulu deals and the spread of their Disney+ platform. This combination indicates that Disney is a cheap buy right now with the potential to have a huge jump following the pandemic.

Overall:

Netflix has a history of performing well following economic downturns. It’s also shown resilience in our current crisis. However, its stock probably won’t see major growth.

Disney is riskier than Netflix in the immediate term but might be gearing up for a huge surge in a few months, just after the COVID-19 pandemic resolves. If you’re comfortable with that added risk, buy now while it’s down.

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