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Disney+ Passes 22 Million Downloads: Time to Ditch NFLX & Buy Disney Stock?

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Disney+ downloads passed 22 million on mobile devices, according to the independently owned app-tracking company Apptopia. The announcement came after Disney (DIS - Free Report) reported that its streaming service had 10 million signups on its first day.

Apptopia reported that Disney+ averaged 9.5 million daily users and ranks in the top spot of both the Apple (AAPL - Free Report) and Google (GOOGL - Free Report) app stores.

Investors should note that Apptopia only measures mobile downloads and usage. Therefore, it does not measure the use of Disney+ on devices like smart TVs, Roku (ROKU - Free Report) devices, and Amazon (AMZN - Free Report) Fire TV Sticks.

Apptopia also doesn’t have information on how many of those downloads came from free trials. However, Apptopia did note that Disney raked in about $20 million from the app through its monthly subscription fees and annual commitments.

Disney stock closed up around 1% today, while streaming rival Netflix (NFLX - Free Report) closed up roughly 2%. Disney shares have outpaced Netflix since November 12, which is when Disney+ was launched.

The Disney+ news didn’t send NFLX stock lower, but Disney’s early streaming success has made some investors wonder just how much DIS stock will climb, and how much further NFLX might fall. But Netflix hasn’t stood idly by as Disney+ heats up. In fact, the company recently grabbed several Golden Globe nominations, with three of its Netflix original movies at the forefront.

Netflix Dominates Golden Globe Nominations

Disney, AT&T’s (T - Free Report) WarnerMedia, and Comcast’s (CMCSA - Free Report) NBCUniversal had long licensed their popular TV shows and movies to Netflix, but now that these studios are gearing up to launch their own streaming services, Netflix has been forced to find an alternative.

In response to the rising competition in the streaming space and losing some of its most beloved content, Netflix has doubled down on its original content.

Netflix aims to keep its over 158 million subscribers by producing binge worthy original series and releasing a steady stream of original movies with star studded casts. Analysts expect Netflix to spend roughly around $15 billion in programming this year alone.

Netflix recently enjoyed the fruits of its labor. The streaming giant received a whopping 34 Golden Globes nominations across both the film and television categories. Netflix’s original movies picked up three nominations for the ‘Best Motion Picture-Drama’ category with The Irishman, Marriage Story, and The Two Popes.

The 17 feature film nominations Netflix received more than doubled the second-place finisher, Sony (SNE - Free Report) . Netflix also grabbed 17 nods for its television series, which further cemented its dominance.

The critic approval it picked up from the Golden Globe nomination bodes well for Netflix moving forward as it keeps consumers interested in what the streaming service has to offer. And the nominations could indicate that Netflix’s massive original content spending is paying off.

Valuation and Growth Estimates

With both companies seeing success from their streaming services, let’s take a look at how they match up in terms of valuation and growth.

Disney currently trades at about 25.1X its forward earnings, which is right around the media conglomerate average of 24.4X. Disney also has a PEG ratio of 5.47 that is right on par with the industry average and a debt to equity ratio of 0.41, which comes is below the industry average of 0.66.

Netflix trades at about 54.7X its forward earnings, which dwarfs its industry average of 12.7X and towers over Disney’s forward multiple. The streaming giant has a PEG ratio of 2.92 that exceeds its industry average of 1.27, but falls below Disney’s PEG ratio. However, Netflix’s debt to equity ratio of 1.81 is higher than the industry average and more than double Disney’s figure.

Our consensus estimates for Disney’s current fiscal year call for earnings to drop 2.8% to $5.61 per share and for net revenue to grow 17.14% to $81.5 billion. The slight decline in Disney’s bottom-line can be possibly attributed to the investments it made to launch Disney+. 

Our fiscal 2021 figures for Disney estimate an 18.5% earnings jump to $6.65 per share and a top-line gain of 7.38% to $87.51 billion.

Netflix’s current fiscal year consensus estimates project a top-line hike of 27.4% to $20.13 billion and a bottom-line climb of 25% to $3.35 per share. Looking ahead to its fiscal 2020, our estimates anticipate net sales to grow 21.8% to $24.53 billion and for earnings to soar 63.6% to $5.48 per share.

While these top-line growth figures look strong, they represent a slowdown from recent years as in fiscal 2018 Netflix saw its sales grow 35.1% and fiscal 2017 saw sales climb 32.4%.

Bottom Line

The substantial growth Netflix has seen over the past several years has driven its valuation to pricey levels. The differences in the companies’ debt to equity ratios may make Netflix the more vulnerable company to potentially unravel if the firm were to hit a rough patch financially. In terms of top and bottom line growth, Netflix looks like the superior growth stock according to our Zacks estimates.

Netflix still has the first movers’ advantage in the streaming space and has bet big on its original content. If Netflix continues to garner the critical acclaim it did at the Golden Globes, then its increased spending on original content may just be a winning formula.

Investors looking for a blue-chip stock with a pipeline to the lucrative streaming space should consider betting on Disney. Those looking for an established streaming juggernaut that just stole the show at the Golden Globe nominations, Netflix may be worth betting on.

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