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Outpacing the House of Mouse: Why Netflix is Now Worth More Than Walt Disney

Last Updated September 23, 2020 1:49 PM
Mark Emem
Last Updated September 23, 2020 1:49 PM
  • The market cap of Netflix, which is just a little over two decades old, is now greater than that of Walt Disney, which is nearly a century old.
  • Amid the coronavirus pandemic, Netflix’s subscriber numbers have swelled.
  • Netflix is a Wall Street darling right now.

There’s a new phrase on Wall Street–‘stay-at-home’ stocks. And Netflix (NASDAQ:NFLX) now firmly belongs in the category of equities benefiting from the fight against coronavirus.

Subscriber numbers have jumped and the stock has followed suit, raising Netflix’s market capitalization above Walt Disney’s (NYSE:DIS) for the first time ever.

On Thursday, Netflix closed at nearly $440. The market cap reached close to $193 billion.

Year-to-date NFLX has appreciated by about 35%. | Source: TradingView

Walt Disney, on the other hand, closed Thursday with a market cap of $184 billion.

How Netflix outpaced the Mouse

Netflix’s stock is surging on the back of original programming and strict lockdown orders around the globe. With nowhere to go, consumers have binged on Netflix originals, including the Tiger King documentary series.

Wall Street has taken note. Currently, Netflix enjoys 25 ‘Buy’ ratings from analysts and three ‘Overweight’ ratings. Only four analysts have recommended that investors sell the stock.

Twenty-five analysts rate Netflix a ‘Buy’. | Source: Barron’s 

Goldman Sachs has raised its price target on the stock  to $490 on expectations that Netflix will outperform during the first quarter. Goldman expects Netflix to increase subscriber numbers by 10 million.

The bank attributes the growth both to new original programming and the coronavirus-related lockdown measures:

Content additions to the platform, combined with the value of Netflix’s library to those staying home during the COVID-19 crisis, drove this outperformance, more than offsetting the lingering impact of last year’s price increase and growing competition in SVOD [subscription video on demand].

Blowout earnings report expected next week

JPMorgan has increased NFLX’s price target to $480  on grounds that the Netflix app was downloaded roughly 21 million times during the first quarter. JPMorgan expects the online streaming giant to enjoy its second-highest quarter ever with regards to subscriber growth.

Morgan Stanley, on the other hand, raised the price target to $450. The investment bank observed that investors should be grateful that Netflix is not an ad-supported business as advertising budgets have fallen amid the pandemic.

Netflix will report Q1 earnings  on Tuesday. Analysts expect revenues to surge 27% year-on-year . Earnings are projected to grow 100% annually.

Why Walt Disney is squeaking and Netflix is not

Since the start of the year, Walt Disney’s stock has lost 30% of its value. Its 2020 low reached a level last hit in 2014.

Walt Disney’s new streaming platform, Disney+, has already gained more than 50 million subscribers , but the company’s more established business segments have been highly affected by the coronavirus pandemic.

Social distancing measures have shut down theaters, theme parks and resorts and cruise lines . Disney also has a television business and declining ad sales have added to the pain. With the wide cancellation of sports events, Disney’s sports network ESPN has been impacted too.

Walt Disney
Source: Twitter 

So, while both Netflix and Disney are in the streaming business, the similarities end there. Netflix is thriving in the lockdown economy while the House of Mouse squeaks in pain.

That being said, Netflix isn’t totally immune from the coronavirus shock. If the coronavirus pandemic worsens and the lockdown measures are not lifted or relaxed significantly, Netflix’s business could suffer . That’s because film and TV production have paused. At the current rate, Netflix could exhaust new content by the fall.