Why Netflix, Disney stocks have 'room to run'

Netflix (NFLX) and Disney (DIS) stocks soared to 52-week highs driven by the booming streaming industry. Bloomberg Intelligence Senior Media Analyst Geetha Ranganathan and Third Bridge Group Sector Analyst Jamie Lumley join Yahoo Finance's Market Domination to discuss the factors that have investors bullish on these stocks.

Ranganathan believes these stocks still possess "room to run." She highlights Netflix's subscriber growth initiatives, such as combating password sharing and introducing ad-supported subscription tiers. For Disney, Ranganathan credits the company's "moderated streaming losses" and its plans to achieve streaming profitability by year's end as catalysts driving stock gains.

While acknowledging Netflix's "very strong position" in the streaming landscape, Lumley points out that competitors have also garnered investor optimism. He cites Disney as a prime example, citing its joint sports streaming venture, with sports as "one of the most valuable assets" in the streaming realm.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

Editor's note: This article was written by Angel Smith

Video transcript

[AUDIO LOGO]

AKIKO FUJITA: Netflix and Disney shares hit 52 week highs this week. Is there still cause to be bullish on the names, or is the streaming sector primed for a correction? We are looking at how to navigate the big picture with the Yahoo Finance playbook.

Joining us now is Geetha Ranganathan, Bloomberg Intelligence Senior Media Analyst, alongside Jamie Lumley Third Bridge Group Sector Analyst.

Geetha, I'm going to start with you. Is this as good as it gets, or is there a lot more room to run here?

GEETHA RANGANATHAN: Thank you so much, Akiko, for having me. I still think there is room to run. Obviously, there is a lot of optimism right now as far as these two names are concerned. Both for, I think, slightly different reasons.

So I think as far as Netflix is concerned, I think, the market generally sees a lot more momentum when it comes to adding subscribers. We know they have those two new initiatives in place. One is, of course, paid sharing, which is the password sharing kind of crackdown. And then you have the advertising tier.

And we did see them as a result of those ad, almost 30 million subscribers in 2023. Obviously, it's not probably going to be that high this year. But still, I mean, consensus expects 20, maybe even upwards of 22, 23 million new subscribers this year.

And, then for Disney it's not so much subscriber growth itself, but rather moderating streaming losses and actually hitting profitability by the end of fiscal 2024. So for both these companies, there is obviously a lot of excitement, I think, that there definitely is room to run.

JOSH LIPTON: Jamie, let's bring you in here and get your take as well. What do you say, Jamie, to those who argue, streaming wars, it's already over. Netflix one. What's your response to that?

JAMIE LUMLEY: Well, I think it's important to understand that although Netflix is clearly in a very strong position, there still a lot of optimism around different other players within the streaming space looking at Disney. There is the potential that it can finally start to fully cut down on streaming losses.

And then also take on new initiatives like the streaming sports venture with Fox and Warner Brothers Discovery. I think a lot of people were surprised to see that there's now going to potentially be a new way to monetize sports content, which continues to be one of the most valuable assets in the space. On top of that as well, thinking with Disney, there is the upcoming launch of ESPN as a flagship streaming app. This could definitely bring more viewers into the fold and facilitate that transition from a legacy linear media business to a much more digital first direct to consumer business.

So although there are definitely a lot of people just looking at Netflix, the margins that they've been able to achieve and really the strong 2023 that they had, it's not over for the other players in the media space.