Following Walt Disney’s (NYSE:DIS) earnings report on Wednesday, it might be leading the streaming war between itself, Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL).
First, the earnings: For Disney’s first quarter in fiscal year 2022, earnings of $1.06 per share were an incredible 231.3% higher than a year prior and bested analysts’ expectations for $0.63 per share by an astounding 67.2%. Revenue of $21.82 billion was 35% higher than a year ago and topped Wall Street’s expectations for $20.91 billion by 4.1%.
Disney+ subscribers also beat the high expectations set by Disney executives, with nearly 12 million subscriptions added in the first quarter. Disney+ set new guidance of 230 million to 260 million subscribers by 2024.
While many subscribers were excited about new exclusive hits on the streaming service like the new movie Encanto and show The Book of Boba Fett, Disney executives firmly stated that “we do not subscribe to the belief that theatrical distribution is the only way to build a Disney franchise.”
Now let’s see how Amazon’s Prime Video service stacks up…
Amazon Prime Video is set to release a Lord of the Rings series in September, with each episode costing around $60 million to make. For perspective, HBO’s (and on a larger level, Warner Media’s (WBD)) hit show Game of Thrones shocked fans when they announced each episode of the last season of the show cost about $15 million to make.
And Apple announced that its Apple TV+ shows and movies earned 200 award wins and more than 890 nominations. Subscribers to Apple’s streaming service also have plenty to look forward to with new shows and movies dropping consistently.
However, Apple does not share the subscriber numbers for Apple TV specifically. During the earnings call, Apple CEO Tim Cook fielded a question about the slowdown in subscriber growth across streaming services and mentioned that Apple, “ended the quarter at 785 million [total subscriptions]. And so we were incredibly pleased with that.” That number accounts for the App Store, Apple Music, Fitness+, Apple Arcade and Apple TV.
Now, Netflix’s growth has been sadly lacking. You may recall that it added 8.3 million users, below its internal target of 8.5 million, but beat analysts’ estimates for 8.2 million. Looking ahead, the company said it expects to add 2.5 million new subscribers in the first quarter, well below roughly the 4 million it added during the first quarter of 2021, not to mention analysts’ forecasts for 6.9 million new subscribers.
Netflix admitted in its letter to shareholders that increased competition from leading streaming services helped lead to the slowdown.
“Consumers have always had many choices when it comes to their entertainment time — competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering,” Netflix said. “While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched.”
If the current outlook met this expectation for growth of 2.5 million subscribers, it would be the lowest quarterly period of subscriber growth since Netflix began reporting the data in 2012.
A Clear Winner
While Disney is the clear winner for subscriber growth, do its fundamentals beat out the other streaming giants as well? According to my Portfolio Grader, not particularly.
In fact, Apple is the only “Buy” right now, as it earns a B-rating. I should add that not only are Disney and Netflix sells right now, but their Quantitative Grade is very poor, too. Clearly, institutional buying pressure has dried up.
The bottom line: While Disney’s subscriber growth and earnings are impressive, I wouldn’t scoop up shares of this streaming giant just yet.
Instead, I recommend you focus on companies with superior fundamentals, i.e., my Growth Investor stocks. For more information on my Growth Investor stocks, I encourage you to sign up for my Growth Investor service today. Once you do, you’ll have full access to my latest recommendations — including the most recent additions to my Growth Investor Buy Lists.
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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Amazon.com, Inc. (AMZN), Walt Disney Co (DIS)
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