If Disney (NYSE:DIS) wants to claim that they’re a victim of circumstances, I won’t necessarily disagree with them. In recent years, the Magic Kingdom has really flexed its muscle. With key (albeit expensive) acquisitions, an investment in Disney stock levers you to perhaps the most valuable entertainment franchises. Moreover, their streaming ambitions, resulting in the Disney+ platform, is a shot across the bow.
However, consumer electronics giant Apple (NASDAQ:AAPL) has now returned the favor. In its highly anticipated iPhone 11 event, Apple announced their pricing strategy for their own streaming service. Called Apple TV+, the underlying company shocked observers with its $4.99 per month introductory pricing. That figure puts it well below every other streaming competitor, which includes top names like Netflix (NASDAQ:NFLX) and AT&T (NYSE:T).
On cue, the markets dished out some punishment. DIS stock absorbed a sizable blow on Tuesday following the announcement. On the following midweek session, Disney stock closed up less than 0.3%. NFLX shares followed a similar pattern.
The one notable exception to the streaming fallout was AT&T. However, its shares moved higher on an activist investor taking a large stake in the firm; thus, it had nothing to do with the headwinds impacting DIS stock.
On the surface, things don’t look too hot for the House of Mouse. When management launched their Disney+ pricing, it was clear they had Netflix in mind. With an introductory price of only $7 a month, it undercut Netflix’s offering by nearly half. That move underlined some of the reasons why people bought Disney stock.
But with Apple essentially doing the same, should stakeholders worry? I’d say no, and here’s why:
Contextually, DIS Stock Is a Better Streaming Investment than Apple
There’s an old saying that “you get what you pay for.” That really applies to DIS stock and its comparison to AAPL regarding streaming.
While Apple’s pricing can’t be beat on a nominal basis, on a contextual basis, it’s truly nothing special. When you drill into the details, Apple TV+ is designed to drive interest in the iPhone 11. As you know, smartphones have become incredibly competitive and likely saturated.
Put another way, Apple TV+ and Disney+ are apples and oranges, no pun intended. That’s very good news for Disney stock, at least specific to the streaming narrative.
Unlike this arena’s powerhouses, Apple TV+ won’t stream licensed programs from third parties. When Apple TV+ launches, it will have nine original shows. Granted, they will feature some immediately recognizable Hollywood A-listers, such as Jennifer Aniston or Jason Momoa. But I can almost guarantee you this: these original shows won’t compete with Disney’s library of content, thus providing meaningful cover for DIS stock.
Interestingly, though, Apple is giving a one-year free membership for Apple TV+ when customers buy select new products. That means Apple should have a massive streaming base in just a few months. And theoretically, that hurts Disney stock.
But the reality is that very few people will elect to keep Apple TV+ once the freebie membership is over. Moreover, with added content, Apple will likely increase pricing, making the whole proposition even more unfavorable to customers.
I think Apple might be underestimating the content power that both Netflix and Disney leverage. The former has won multiple industry awards, while the latter has lucrative franchises like “Star Wars.”
With the limited content that you get from Apple TV+, the better deal is really Disney or Netflix.
Should Investors Buy Disney Stock?
But before you dive into Disney stock, I think investors should consider the present environment. Of course, one of the dark clouds of the markets is the U.S.-China trade war. With a deal unlikely in the nearer term, the company faces tourism risks that could impact its resort business.
Plus, the broader markets haven’t moved in a convincing fashion. Yes, the benchmark indices have put together multiple consecutive bullish sessions. But Wall Street is starting to lose credibility with its seesawing price action. That might cap interest for buying Disney stock near all-time highs.
That said, if DIS stock dips lower, perhaps to its 200-day moving average, I would be very interested. Companies associated with the entertainment industry have a viable case for surviving – and sometimes thriving – in a recession.
As of this writing, Josh Enomoto is long T stock.