Website traffic is an important tool for gauging the performance of media companies like Netflix and Disney. This is because as more traditional media companies like Disney launch direct-to-consumer streaming services, most users sign in to these services through their websites or apps.
Using the TipRanks stock comparison tool, let us compare two media companies, a pureplay streaming company like Netflix and a traditional media company like Disney. Let us see whether we can gauge the expected performance of these companies in their upcoming earnings through the TipRanks website traffic tool and look at what Wall Street analysts are saying about these stocks.
Netflix (NASDAQ: NFLX)
Netflix is expected to announce its fiscal fourth-quarter results this week, on January 20. But just before its earnings, the stock has slid 2.5% in the past five days and by 10.4% in the past month.
This is because investors and analysts alike have become skeptical about whether Netflix can sustain its pace of subscriber net additions. That’s because the company’s rise in paid memberships globally is slowing down.
In the third quarter, the company had global paid memberships of 213.6 million, a growth of 9.4% year-over-year. This rise in paid memberships is expected to slow down in Q4 to 9%, with paid net additions of 8.5 million.
Even the rate of revenue growth for Netflix has slowed down to a year-over-year growth rate of 16.3% in Q3, versus a year-over-year growth rate of 22.7% in Q3 of 2020.
As the company is expanding its content library with new content, it is also raising prices in certain territories. As the company explains on its website, “When we change plans or prices, we’re always working to improve the Netflix experience and invest in quality content for our subscribers around the world.”
Indeed, last week, Netflix raised its prices for its membership plans in the U.S. and Canada. The company raised the price of its basic plan by $1 to $9.99 per month, while the standard plan increased from $13.99 to $15.49, and the premium plan jumped from $17.99 to $19.99 per month.
But will this price rise sustain the growth momentum for Netflix?
Stifel Nicolaus analyst Scott Devitt has some near-term concerns regarding this, ahead of its fiscal Q4 earnings. Earlier this month, the analyst, while keeping a Buy rating on the stock, lowered the price target from $690 to $660 (25.5% upside) on the stock.
Some of Devitt’s concerns include the possibility of subscriber growth slowing down, “weakening app engagement beginning in November,” and lower profits in international markets, as predicted by the recent price reduction in the Indian market.
The analyst cited app engagement data from Apptopia that suggested that Netflix’s subscriber additions in Q4 could be “modest.” This is because NFLX clocked monthly active users (MAUs) as of December 31 of around 217.6 million, a drop of around 2.2 million from Netflix’s expectations of 8.5 million net additions in Q4.
This trend is also borne out by the TipRanks Website traffic tool, which indicates that growth in monthly unique visitors across all devices has fallen year-over-year by 0.6% to 300.1 million while there is a slight increase of 0.1% year-over-year in Q4 Netflix traffic to 889.1 million unique visitors.
But these concerns aside, the analyst still believes in NFLX’s strategy execution in Q4, as it released “a slew of high-profile Original content and making solid headway on its video games and visual effects initiatives.”
The rest of the analysts on the Street are cautiously optimistic about Netflix, with a Moderate Buy consensus rating based on 23 Buys, 5 Holds, and 3 Sells. The average Netflix stock prediction of $662.93 implies upside potential of approximately 26.1% to current levels for this stock.
The Walt Disney Company (NYSE: DIS)
Disney has also been a beleaguered stock as shares have tanked 11.4% in the past year. Investors have been concerned about whether the company will be able to achieve subscription numbers of between 230 million and 260 million by FY24, especially for Disney’s direct-to-consumer (DTC) services.
Disney is expected to announce its fiscal Q1 2022 earnings on February 9.
Even J.P. Morgan analyst Alexia S. Quadrani sees fewer catalysts for Disney’s DTC business, especially in the first half of this year, ahead of the company’s upcoming earnings.
According to the analyst, this is because many of Disney’s DTC services will launch in the latter half of this year, including in Eastern Europe, the Middle East, and South Africa. Moreover, the analyst added that content releases will likely “reach a steady state in FQ4’22 with one flagship title per week, along with more local-language content.”
Quadrani expects that Disney+ will expand to 110 countries by the end of this year and will be present in 160 countries by FY23.
Furthermore, the analyst believes that investors should ignore the lower-than-expected “1H’22 Disney+ subscriber additions and near-term noise at the legacy businesses due to COVID-19, as we expect a re-acceleration of sub growth into 2H22 and F23, as well as the broader recovery of the legacy business with Parks ramping back to pre-COVID margin levels in F23.”
Indeed, Disney’s management had commented on its fiscal Q4 earnings call that while the company did not anticipate that “that sub growth will necessarily be linear from quarter to quarter,” the company does expect that Disney+ subscriber net additions will be “meaningfully higher” in the second half of FY22 than in the first half of the year.
As a result, DIS remains Quadrani’s top pick in the Media sector, as the analyst thinks that the company has the best intellectual property (IP) in the industry and has not benefitted until now “from the flywheel of consumer interactions from DTC/parks/theatrical releases, which should propel the stock higher longer term.”
The analyst is upbeat about the stock with a Buy rating and a price target of $220 (44.8% upside) on the stock.
Other analysts on the Street are cautiously optimistic about Disney, with a Moderate Buy consensus rating based on 15 Buys and 7 Holds. The average Disney stock prediction of $195.85 implies upside potential of approximately 28.9% to current levels for this stock.
When it comes to Disney’s website traffic across all its domains, the TipRanks Website traffic tool indicates that there is a jump of 5.8% year-over-year in Disney traffic in Q4 to 848.5 million unique visitors.
Bottom Line
While analysts are cautiously optimistic about both stocks, it seems that both stocks are poised for upside, the near-term concerns aside. Based on the upside potential over the next 12 months, Disney seems to be a better Buy.
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