Disney vs Netflix: Comparing Valuations

Disney’s stock had a big day after beating earnings expectations in the second quarter, and the company is feeling optimistic about its theme park business going forward. But when we look at the numbers, how does Disney compare to its streaming rival Netflix?

Well, let’s talk about valuation. When we look at the price-earnings ratio (PE ratio), which shows how much investors are willing to pay for a company’s earnings, Netflix is trading at a trailing PE of around 55, according to Yahoo Finance data. This is considered high, reflecting the growth potential investors see in the company with more subscribers, hit shows, live events, and ads driving that growth.

On the other hand, Disney’s trailing PE is around 33, which is significantly lower than Netflix. This suggests that while investors are still optimistic about Disney’s future with Disney+ and its theme park expansion, they may not expect the same explosive growth as Netflix. In simpler terms, investors are willing to pay almost twice as much for Netflix because they believe in its future growth potential.

Looking at trader activities, it’s clear that Netflix is the favorite among retail traders, with more trading volume compared to Disney. Netflix has seen strong momentum in its stock price, hitting record highs. In contrast, Disney’s stock has been relatively flat over the past five years, with smaller retail trading volume.

In times of macroeconomic uncertainty, Netflix is seen as a defensive investment, as it relies less on advertising compared to other tech companies like Meta. Disney faces challenges on the consumer side, especially in its parks business if travel and tourism spending decline.

Overall, investors seem more bullish on Netflix at the moment due to its pure play in streaming, while Disney has more diversified business streams but also more exposure to consumer spending trends. It’s clear that both companies have their strengths and weaknesses, but for now, Netflix seems to have the edge in terms of valuation and investor sentiment.