Menu

Six Reasons Why Disney Could Beat Netflix At Its Own Game: Analyst

Walt Disney (DIS) should emerge victorious against Netflix (NFLX) in the U.S. video streaming battle, an analyst predicts, as Wall Street looks past a weak earnings report and ahead to the upcoming Disney+ launch. Disney stock rallied and Netflix stock also gained.

On Wednesday, Needham analyst Laura Martin wrote she expects Disney to "win" the subscription video battle in the U.S., adding subscribers at the expense of Netflix amid subscription fatigue. She offered six reasons:

  • Disney+ is priced more than 30% below Netflix (at $7/month vs. $12/month for standard Netflix pricing).
  • Disney+ will host most Pixar, Marvel, Star Wars and Disney movies at launch on Nov. 12.
  • Disney products already reach 100 million households per year, which should lower costs for acquiring customers for Disney+.
  • The new $12/month bundled pricing for Disney+, Hulu and ESPN+ should lower customer churn.
  • Strong balance sheet and free cash flow give Disney "more staying power" than Netflix.
  • Disney has several content creation studios under its corporate umbrella.

On Thursday, Credit Suisse added to the bullishness for the Disney+ streaming video service. Analyst Douglas Mitchelson expects several marketing and distribution partnerships over the next few months, which should boost investor confidence in the "global opportunity" for the platform.

"While Disney has outperformed the S&P 500 by 8% YTD, we see scope for further upside to Disney+ investor sentiment into its U.S. launch," he added.

He also raised his rating on Disney stock to outperform from neutral and his price target to 150 from 130, in a note titled "More beauty than beast."

Netflix and Amazon (AMZN) dominate video streaming. But they are seeing new competition from the likes of Disney, Viacom (VIAB) and Apple (AAPL).

Viacom Helps Lift Disney Stock

Disney stock rose 2.3% to 137.96 on the stock market today, but remain below the 50-day line. Shares had broken out of a 142.47 flat base buy point but fell as much as 7.2% below that entry on Wednesday, tripping the 7%-8% sell signal on the earnings miss.

Also adding a lift to Disney stock and other media companies is Viacom's strong earnings report early Thursday. EPS rose 1.7% to $1.20, topping forecasts for $1.06.

Revenue grew 4% to $3.36 billion, a narrow miss, but domestic ad revenue rose 6%, marking the first increase in five years and offering hope for a turnaround in the beleaguered parent of MTV, Nickelodeon and Paramount Pictures.

"Viacom's return to growth in domestic advertising was a milestone achievement in the company's evolution," the company said in a written statement.

Viacom continues to expand Pluto TV, with its free ad-supported streaming service notching 18 million active users in July. It launched Pluto TV Latino the same month.

The Viacom earnings beat came two days after Disney's big miss. Disney management expects the new Disney+ bundle to boost its digital ads business, if ad-supported Hulu adds subscribers more aggressively.

Netflix added 2.6%. Viacom stock popped 4% to 30.84, rising above the 50-day moving average. Rival Fox (FOXA) sank 5%, despite reporting strong earnings late Wednesday.