1 Stock Stream to Buy and 1 to Sell in Downward Market

With global markets destabilized by Russia’s ongoing war in Ukraine and high inflation rates, many economists have raised concerns about a possible US recession. For investors considering the best way to prepare, it makes sense to consider which competitor stocks to hold and which to give up in a downturn.

With this in mind, this is why it makes sense to buy Walt Disney (DIS -3.20%) and sell Netflix (NFLX -1.78%) right now.

One stock is underperforming, another is even worse

At the time of this writing, Walt Disney is hovering around $97 per share, well below the $157 price tag at the start of 2022. Indeed, at the start of the year, Walt Disney outperformed S&P 500 by a few points. And while both have continued to decline throughout the year, Walt Disney’s nearly 38% decline has outpaced the S&P 500’s 24% decline.

Netflix’s stock price has seen a much more dramatic drop during 2022. From around $597 in early January to hitting over $240 in recent days, Netflix’s 60% drop may represent the streaming company that has lost these subscribers. year. That doesn’t mean they don’t yet have plans to reverse those losses, but the steps haven’t fully materialized yet.

Netflix ad-based plans still sketchy

Both Walt Disney and Netflix have outlined plans for ad-supported streaming tiers. Walt Disney will introduce a new Disney+ offering worth $7.99 per month in December 2022, featuring approximately four minutes of advertising for every hour of content. This offer will replace the current Base tier, which will increase the price from $7.99 to $10.99 per month.

Netflix hasn’t revealed a release date or pricing for its ad-based plan yet, but report sources suggest it could arrive in November 2022, priced between $7 and $9 per month. If the range is correct, it will bring lower entry prices for the streaming service, which currently starts at $9.99 per month. However, Netflix said “no decision has been made.”

A recent survey of US-based Netflix subscribers by Review.org found 25% said they plan to cancel their subscription this year, with 40% of respondents citing service fees as an issue. So, unless the company introduces a new lower cost level, it still risks losing customers. For investors, Netflix’s opacity can sow uncertainty, especially with the possibility of more challenging economic times ahead.

Walt Disney has a more established franchise

The Review.org survey also highlights another issue for Netflix: A third of respondents feel streamers aren’t bringing enough shows they want to watch. The study doesn’t provide further insight into what viewers are looking for, but Fandom’s Streaming Status report from April 2022 shows franchises are especially important to consumers when considering which streaming service they want to pay for.

The Walt Disney Disney+ streaming service is the central repository for Marvel and Star Wars TV shows and movies. From She-Hulk: Lawyer at Law and Avengers to Obi-Wan Kenobi and Rogue One: The Story of Star Wars, Disney+ owns many properties that are part of a wider rug of franchises. For dedicated fans who want to stay abreast of an ever-evolving world, maintaining a Disney+ subscription is easy.

While Netflix doesn’t have anything as extensive as Marvel or Star Wars, it has dabbled in its own world-building projects. from him sand man adaptation to it The Witch series, the company seems to understand that franchising is an important part of retaining committed customers.

Disney has alternative income streams

As mentioned, Netflix is ​​implementing plans to increase subscriber growth and thereby increase revenue returns from its subscribers. One of these approaches is investing in video games, making many titles available exclusively to its subscribers. However, that strategy is still in its infancy and has yet to drive serious growth for Netflix.

In contrast, Walt Disney is a much more diversified company than Netflix, with decades of experience running additional businesses that draws from its vast intellectual property bank. Fans can visit Disneyland, where they are likely to meet characters like Mickey Mouse and Donald Duck, or they can visit the Disney Store to buy Toy story lunch box or Lion King doll.

For investors, Walt Disney’s strengths only highlight Netflix’s weaknesses. And at a time when the economic struggle seems imminent, Walt Disney shares seem to be the better long-term bet.

Tom Wilton does not have a position in any of the shares mentioned. The Motley Fool has the position and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: January 2024 long call $145 at Walt Disney and January 2024 short call $155 at Walt Disney. Motley Fool has a disclosure policy.

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