While Disney’s (DIS) shares have dropped in the wake of Netflix’s (NFLX) disappointing earnings report, Netflix’s woes don’t really apply to Disney, according to TheStreet.com’s Action Alerts Plus team.
Netflix reported a loss of 200,000 subscribers for the first quarter and said it expected to lose another 2 million in the second quarter.
But Disney, whose streaming-subscriber numbers pale compared with those of Netflix, “continues to expand its geographic footprint,” the AAP team wrote in a commentary.
“We also know that Disney has been investing in its content library as well, with those efforts expected to start paying off in the second half of 2022.”
What’s happening isn’t “so much ... streaming fatigue but rather the much expected competitive landscape finally catching up to Netflix,” the AAP team said.
Perhaps that’s why Netflix said it would consider offering a cheaper service with advertising, “making it a follower to Disney,” the AAP team said.
“Let's also remember that unlike Netflix, Disney has other businesses, especially the parks business, that are likely beneficiaries of the post-omicron reopening.”
McCormick Outlook
Meanwhile, some negative news in French foods company Danone’s (DANOY) earnings report contrast with a better outlook for U.S. spice specialist McCormick (MKC), the AAP team said.
Danone said it anticipated a volatile operating environment, with sustained supply-chain disruptions and inflation around the mid-teens in 2022.
McCormick, on the other hand, “should benefit from the consumer increasingly dining at home in an effort to maximize their spending dollars,” the AAP team said.
“It also doesn't hurt that we'll soon be in the grilling and summer cookout season, a robust time of year for the company's spice and marinade offerings.”
Morningstar on Disney
As for Disney, Morningstar analyst Neil Macker is bullish, assigning it a wide moat and putting fair value for the stock at $170. It recently traded at $126. That's 35% potential upside.
After Disney’s latest earnings report in February, he wrote, “Disney kicked off fiscal 2022 on a strong note, as [streaming service] Disney+ added 11.8 million customers in the quarter versus 8.3 million for Netflix.”
Further, “with [Disney] management still warning of lumpiness in net adds and stronger growth in the second half of fiscal 2022, we remain comfortable with our projection of 45 million net adds in fiscal 2022,” Macker said.
