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A 25% advance since the end of July has boosted Netflix’s market value to $287 billion. Disney is poised to see its market value shrink to about $300 billion when markets open on Thursday, falling 4.9% in premarket trading.
While Netflix’s subscriber growth has been boosted by hit shows such as Squid Game, additions to the Disney+ streaming app missed Wall Street estimates on Wednesday evening. The Disney World theme-park owner has made the family streaming product its major focus for growth in coming years.
For Morgan Stanley (NYSE:MS) analyst Benjamin Swinburne, streaming is key to Disney’s investment case. His overweight rating “is based on the view that Disney is one of a shortlist of global streaming platforms that can achieve significant scale and profitability.” But he doesn’t see that priced into the shares yet.
Wall Street is generally more bullish on Disney than Netflix. About 78% of analysts have buy ratings on the former and none recommend selling, while 73% recommend buying Netflix and five have sell ratings. Average price targets imply 15% upside for Disney and 5.3% for Netflix.
Widening Premium
Netflix shares trade at a widening premium to Disney’s based on Wall Street’s preferred valuation measure, enterprise value to projected earnings excluding costs like interest and taxes. Netflix is priced at about twice Disney’s enterprise value to projected Ebitda, according to Bloomberg data.
The premium is due to a chasm in the amount of revenue the companies generate per streaming subscriber, according to Geetha Ranganathan, a senior analyst at Bloomberg Intelligence. Netflix customers contribute almost three times the average revenue per month than Disney+ subscribers.
“Disney’s singular aim was to garner that Netflix-type multiple, and they’ve succeeded mostly,” said Ranganathan. “The big question is whether Disney can continue to exceed expectations for streaming subscriber growth without sacrificing profitability.”
Rivian’s Starry Debut
Another valuation debate right now surrounds Rivian Automotive Inc (NASDAQ:RIVN). The electric vehicle maker surged 29% in its first day of trading after attracting a flurry of retail investor buying. That pushed its market capitalization to $86 billion, above that of Ford Motor (NYSE:F) Co., despite having no meaningful revenue.
Rivian continued its rally on Thursday, rising 9% in premarket trading. It was the most-traded stock on Fidelity’s brokerage platform on Wednesday, with buy orders totaling nearly three times second-ranked Tesla (NASDAQ:TSLA) Inc.
Rivian’s surge outpaced the average performance of this year’s technology debuts, which have jumped by an average of 23%, according to data compiled by Bloomberg. Among tech IPOs that raised at least $1 billion, Rivian had the best debut session since Kanzhun Ltd. surged 96% in June.
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