Yahoo Finance

Disney shares jumping today after it reported strong second quarter earnings, but the company still has a ways to go before catching up to the massive run-up of streaming giant Netflix. For more, we're bringing in Yahoo Finance senior reporter, Ali Canal. Interesting compare and contrast.

Compare and contrast, and a lot of catch-up to do both when it comes to those year-to-date earnings gains, along with valuation. And let's start there on the valuation side, because if you take a look at some of the PE ratios for this company, Disney really lacks what you see with Netflix. So PE ratio, that's also known as price to earnings ratio. A higher PE suggests investors are willing to pay more for each dollar of a company's earnings. Right now, as I mentioned, Netflix is trading at a trailing PE of just around 55. That's according to Yahoo Finance data. This is a very high valuation. A big reason why it stems from the growth story: more subscribers, more hit shows, more live events, more ads. These are all catalysts that investors are bullish on over the long term. Now, let's compare that to Disney, which is sitting at a trailing PE of about 33. That's significantly lower and suggests that while investors still see promise in Disney's future, especially with the release of Disney+, the debut there, the company's IP, its park expansion, they're not expecting the kind of explosive growth that they anticipate from Netflix. So, in other words, investors are saying that they believe in Netflix's future so much that they're willing to pay nearly double what they pay for Disney. So that's a pretty big bet. It hinges on Netflix continuing to deliver, which is why some on Wall Street say the company's valuation is just way too high. Yet we continuously see retail traders pile into this stock. Now you're looking at a chart from VandaTrack Research. Their senior VP told me that Netflix is usually much more heavily traded compared to Disney. You can see some large dip buying in mid 2022 that eventually turned into massive momentum chasing later that year. And then even today, retail still swings between dip buying and momentum chasing as we've seen the stock really hit record after record. Meanwhile, Disney stock has been pretty lackluster over the past five years, and because of that, retail traders have tended to sell the rips since 2024, essentially offloading these positions, and generally inflows are smaller here, too. So, bottom line, Netflix shares continuing to be the outperformer, at least when we look at some of this recent stock action.

Macro uncertainty, Ali. That was really the theme of J. Powell's presser today. How is that kind of showing up and impacting these media names?

Yeah. Well, Netflix in particular has been looked at as a very defensive name. Sources have told me that it's the cleanest story in tech, especially considering all of those macro headwinds, the impact that that has on certain revenue streams like advertising. Typically in a downturn, ad budgets are first to go. And lucky for Netflix, it's not as exposed to advertising compared to some other big tech names, like Meta, for example. Disney also faces challenges on the consumer side. So if there are any pullbacks in travel, tourism spending, that's going to directly hit its parks business. And even in the earnings that we saw earlier today, we saw international operating income at the parks drop 23% due to a challenged consumer in China and Hong Kong. So definitely more at risk, but at the same time, Disney also has more levers that it can pull in case any one area of their business has weakness. Netflix is just a pure play streaming company, so it totally depends on the moment, but certainly investors are more bullish on Netflix right now.

Yeah, definitely. Thanks, Ali. Appreciate it.