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Category: Netflix (NFLX) and Walt Disney (DIS)
Date: 28 June 2020 Stock price of Netflix: $443.30 Stock price of Walt Disney: $109.10 Its the battle of the streaming services. We compare the stock of Netflix (NFLX) and Walt Disney (DIS) over the last couple of years and take a look at which stock offers the most potential future upside based on their current financials and stock price level.
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So if one had to buy one of these two barista based companies stock right now who would and should you buy? Netflix is basically solely focused on online entertainment streaming while Disney has a much broader portfolio with coverage in theme parks, news, sport and online entertainment streaming. Based on their revenues for 2019, Disney is roughly 3.5 times the size of Netflix. "
More about Walt Disney (DIS)
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to Consumer & International (DTCI). Brands owned by Disney includes ESPN, Marvel, Fox, Pixar.
Quick facts about Walt Disney (DIS)
Quick facts about Walt Disney (DIS)
- Walt Disney is listed on the New York Stock Exchange (NYSE) under share code ticker: DIS
- Walt Disney employs around 223 000 employees (as at end September 2019)
- Disney Channel US has 86 million subscribers
- ESPN has 83 million subscribers
- Disney+ streaming service has just over 50 million subscribers
- Freefrom (FX) has 87 million subscribers
- Revenues in fiscal 2019: $69.57 billion
- Earnings per share for fiscal 2019: $6.64
- PE ratio of Walt Disney: 16.4
- Shares in issue: 1.656 billion
- Stockholders equity in Walt Disney (DIS): $94.773 billion
- Stockholders equity per share: $57.23
- So Disney is trading at 1.90 times its stockholders equity per share which is just outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Parks, experience and products brought in $24.7 billion in revenues in 2019
More About Netflix (NFLX)
Netflix, Inc. (“Netflix”) is the world’s leading subscription streaming entertainment service with over 182 million paid streaming memberships in over 190 countries enjoying TV series, documentaries and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, all without commercials.
Quick facts about Netflix (NFLX)
Quick facts about Netflix (NFLX)
- Netflix is listed on the Nasdaq under the stock code ticker: NFLX
- 182.86 million subscribers as at the end of their 1Q 2020
- Average monthly revenue per paying membership $ 10.82
- Operating margin: 13%
- Revenues for their 2019 fiscal year: $20.156 billion
- Shares in issue for Netflix: 451.765 million
- Earnings per share (EPS) for full fiscal 2019: $4.13
- PE ratio of Netflix: 107.3
- Cash and cash equivalents at the end of 2019 fiscal year: $5.018 billion
- Stockholders equity of Netflix: $8.409 billion
- Stockholders equity per share: $18.6
- Netflix is trading at 23.3 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
Netflix (NFLX) stock vs Walt Disney (DIS) stock
The image below shows the stock price performance of Netflix (NFLX) and Walt Disney (DIS) over the last 3 years/ While both these firms are active in the entertainment and online entertainment streaming industry the stock price performance of the two stocks are polar opposites. Over the last 3 years the stock of Netflix has increased by 179.3% while the stock of Disney returned only 4.52% over the same period of time. So the question is whether Netflix has run to far and whether Disney's subdued price action over the last 3 years offers a buying opportunity into one of the biggest entertainment and online entertainment and streaming services in the world?
So if one had to buy one of these two barista based companies stock right now who would and should you buy? Netflix is basically solely focused on online entertainment streaming while Disney has a much broader portfolio with coverage in theme parks, news, sport and online entertainment streaming. Based on their revenues for 2019, Disney is roughly 3.5 times the size of Netflix.
One of our first comparison metrics is the price to stockholders equity per share ratio. Stockholders equity per share shows what each stockholder will get back if a firm sells all its assets pays all its debt and liabilities and distributes the rest to stockholders. The lower this ratio the closer a company trades to its stockholders equity per share Netflix is trading at 23 times its stockholders equity per share. So if Netflix where to sell all its assets, pay all its debt and distribute the rest to stockholders, stockholders will only get back $18.60, yet its trading at $443 a stock. This shows how lofty Netflix valuation is. On the other hand Disney is trading at 1.9 times its stockholders equity per share, so Disney stockholders will get back $57 odd and its trading at just under $110. So from this perspective Disney is much better priced than Netflix.
Netflix is trading at a Price to Earnings (PE) ratio of far greater than that of Walt Disney. Netflix's PE is 107.3 while Walt Disney has a PE ratio of 16.4. Looking for a quick way to interpret a PE ratio? Assume Netflix has the same earnings per share each year into infinity, at its current price it will take 107.3 years before all Netflix earnings equals their current stock price. For Disney it will take 16.4 years for their earnings to equal their stock price of their earnings per share remained the same each year into infinity. So the higher the PE ratio, the longer it will take a firm's earnings to match the price you as the investor is paying for a stock.
Disney is also paying a dividend while Netflix is not. And we cannot see the exponential growth in Netflix subscriber numbers to continue for to much longer into the future, which will affect future earnings potential. While their extreme focus on streaming only is a blessing for the group it can also be a curse as they have no other sources of revenue while Disney has multiple streams.
Therefore in this battle between the entertainment streaming services we rate Walt Disney as the Winner
Netflix is trading at a Price to Earnings (PE) ratio of far greater than that of Walt Disney. Netflix's PE is 107.3 while Walt Disney has a PE ratio of 16.4. Looking for a quick way to interpret a PE ratio? Assume Netflix has the same earnings per share each year into infinity, at its current price it will take 107.3 years before all Netflix earnings equals their current stock price. For Disney it will take 16.4 years for their earnings to equal their stock price of their earnings per share remained the same each year into infinity. So the higher the PE ratio, the longer it will take a firm's earnings to match the price you as the investor is paying for a stock.
Disney is also paying a dividend while Netflix is not. And we cannot see the exponential growth in Netflix subscriber numbers to continue for to much longer into the future, which will affect future earnings potential. While their extreme focus on streaming only is a blessing for the group it can also be a curse as they have no other sources of revenue while Disney has multiple streams.
Therefore in this battle between the entertainment streaming services we rate Walt Disney as the Winner