Netflix’s year-end results were not kind to Wall Street. Its stock fell due to weak financial guidance. Does Disney+ – another big name in streaming – face a similar fate?
In February, Disney (DIS) reported its first-quarter earnings, and Wall Street is paying close attention to Disney+, an essential part of its media empire.
The company’s earnings will be closely scrutinized this quarter more than usual.
It’s not that Netflix wasn’t performing well. It was just that Wall Street was expecting it to do even better.
Netflix (Nflx) Stock Has Been on a Wild Ride in Recent Days
In January, the company said that it lost U.S. subscribers, and its stock promptly plunged 14%.
But Netflix then reported better-than-expected global subscriber growth in February, and its shares soared 15%.
The stock jumped after a Wall Street analyst told clients that he’s bullish on Netflix because of its “superior content and technology”.
Investors Now Have to Decide Whether They Will Be Disappointed With Disney+
Disney+ has already racked up more than 28 million subscribers since its launch in November, and it’s on track to hit 60 million by the end of next year.
Disney says the service is outpacing its forecasts, especially in international markets where it has only been available for a few months. The stock price fell nearly 5% after Netflix (NFLX) released its results.
And shares of Netflix are still trading down roughly 10% from their all-time high above $423 in late December.
However, There Are Some Concerns About Whether the Same New Competition Is Hurting Disney
In November, Disney announced its fourth-quarter streaming revenue growth slowed.
Disney’s stock fell as much as 8.5% following the announcement. In addition, the stock price has fallen from a record high of $203 per share last March to $142 per share in February.
Disney (DIS) and Netflix are undoubtedly unique in their pursuits. It is due to Disney’s more diverse business model, including cable networks, theme parks, films, and merchandise.
But both are betting big on streaming video services as they try to win over customers who increasingly want to watch TV shows and movies online instead of conventional movie theaters and cable TV.
Disney Had Hoped for 200 Million
However, Disney has been betting on streaming, and as Disney+ goes, so does the rest of Disney. So the number of people who bought plush dolls of Baby Yoda and tickets to Disney World does not matter to Wall Street if the service is struggling to attract subscribers.
And it’s because: Netflix had 86.7 million paid subscribers in the U.S. and Canada, according to research firm FactSet — about the same number of customers Disney+ has globally just 14 months after launching.
Netflix is a Cautionary Tale for Investors in Disney
The company rose to prominence by dominating the subscription streaming market and turning it into a $150 billion company.
But in recent years, Netflix has struggled to sustain its growth while facing tough competition from companies with deeper pockets like Disney and Apple.
Netflix’s stock has been slammed over the past year as the company continues to spend on original content and add customers abroad at a slower pace than expected. As a result, the store is down about 25% over the past year, compared to Disney’s roughly 16% rise.
As Netflix’s growth has slowed, Wall Street has turned on the company because there are questions about how long it can continue investing in the content before it needs to return value to shareholders and investors.
Disney Is Now in the Spotlight to See if It Can Match Netflix’s Success. There Are Signs That Disney’s Stock Is About to Fall
Netflix shares are down nearly 20% since it reported disappointing subscriber growth in January. Likewise, Disney+ has cooled down compared to the previous year, reaching 100 million subscribers.
In the fourth quarter of 2021, Disney+ added just two million subscribers, down from 12 million in its third quarter. And Netflix also reported disappointing earnings last month when its stock fell up to 20%.
The success of Sesame Street will have a profound effect on the Disney+ service, which is set to launch in November. The Beatles takeover should give early adopters of the service—and those considering signing up—a lot to enjoy.
The real challenge for Disney will be whether it can maintain that momentum as it adds more and more titles to the service. Witness the brilliant content on both streaming platforms via Windstream internet. Stream high-quality content at incredible prices without fretting about any data overage charge.