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Walt Disney (DIS) Stock Rises as Netflix Beats Q3 Expectations

  • Shares of Walt Disney (DIS) gained conspicuously following Netflix (NFLX) beating third-quarter expectations.
  • Netflix’s recent subscriber gains bodes well for streaming services as entertainment heads home.
  • DIS stock specifically benefits from a massive and popular content library.
DIS stock - Walt Disney (DIS) Stock Rises as Netflix Beats Q3 Expectations

Source: chrisdorney / Shutterstock

While Walt Disney (NYSE:DIS) typically leads trends in entertainment, this time, it’s playing the role of the caboose. Earlier on Wednesday, streaming services giant Netflix (NASDAQ:NFLX) reported encouraging results for its third quarter. Therefore, the expectation is the positive energy may rub off on Disney, thus bolstering DIS stock.

As InvestorPlace writer William White mentioned, Netflix reported diluted earnings per share of $3.10. This tally overwhelmingly beat out the consensus expectation for $2.13 per share. Further, the company generated revenue of $7.93 billion, beating out analysts’ revenue estimate of $7.84 billion. Perhaps most importantly, Netflix gained subscribers, reaching a total count of 223.09 million.

According to Benzinga, global streaming paid memberships grew 4.5% on a year-over-year basis. Nominally, the net addition came out to 2.41 million. At time of writing, Netflix shares jumped nearly 14% while DIS stock gained nearly 1%.

What’s more, TipRanks reported prior to the earnings disclosure, its website traffic screener “showed that Netflix’s web visits are rising, indicating higher user engagement that could translate into subscriber growth in Q3.” Specifically, web visits to Netflix increased 6.63% quarter-over-quarter in Q3.

“Given the rise in traffic, Netflix announced that it had higher engagement than its peers and accounted for more TV time,” TipRanks mentioned. While a positive for NFLX, the traffic bump also bodes well for DIS stock on broader entertainment transitions. The latter also showed a quarter-over-quarter increase in traffic to its Disney Plus service.

Excitement Brews for DIS Stock

Looking ahead to Disney’s earnings results – scheduled for Nov. 8 – many investors anticipate similar trends to bolster DIS stock. Generally, the entertainment landscape may be returning back to the living room, which feeds into the company’s Disney Plus streaming unit.

During the onset of the coronavirus pandemic, streaming companies like Netflix benefitted handsomely due to a literal hostage audience. In addition, live sporting events suffered cancellations during the early phase of the crisis, cynically bolstering streaming businesses.

However, the cabin fever effect exacerbated over two years of various mitigation measures. Thus, when government agencies relaxed or outright eliminated these restrictions, consumers gravitated toward “real” experiences such as travel. That hurt DIS stock and other streaming businesses, as consumers no longer wanted to sit at home.

However, the traffic increases indicate some normalization is occurring in the entertainment landscape. Ultimately, this should benefit DIS stock as consumers redirect their discretionary funds to cheaper pursuits (for instance, streaming services and even box office attendance over vacations abroad.)

As consumer behaviors normalize, Disney may also reap benefits from its massive content library. For instance, ownership of the Star Wars franchise should help the company gain subscribers. Further, CNBC reported in 2018 that Disney already recouped its $4 billion investment in the franchise. Therefore, whatever it gains from the Star Wars universe is net accretive.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2022/10/walt-disney-dis-stock-rises-as-netflix-beats-q3-expectations/.

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