Movies and television shows have a certain magic to them. They let the viewer escape to another world or just enjoy a little while in someone else’s story. Movies and television can make you laugh and cry they can also make you money.
In this day and age of binge watching and video everywhere, movie stocks can be a solid investment. Just make sure you understand the industry before you place your bet and open a position.
While big movies used to be an almost recession-proof industry, that was decades ago.
Movie stocks are no longer one-trick ponies. Depending on the company, they might make blockbuster movies, operate television channels, film “tv shows,” provide streaming services, attract visitors to theme parks and more.
Because of the nature of the way these movie stocks operate today, there are many factors that are going to influence viewership for better or worse.
The availability of media options, the cost of providing those services, and the comparative costs of cable as well as market trends are going to have an impact on these stocks.
Plus, they have to deliver better than their alternatives, producing the right movies, procuring the right shows, and offering it all at a good price.
A bet on movie stocks is a bet that people will keep watching movies, they will go to the movies, or they will pay for streaming services.
None of these things are guaranteed so investing in movie stocks come with certain risks.
The Walt Disney Company [NYSE: DIS] gets a large part of its revenue from its theme parks.
In 2018, the Parks’ division brought in almost $4.5 billion out of the $20.3 billion the company reported for the fiscal year. That’s also where the Walt Disney Co is putting its efforts for growth.
The New York Times reported that Disney is concentrating on growing the most popular parks in its portfolio (e.g., Disneyland) and upgrading lower performing destinations (e.g., Disneyland Paris, Epcot).
Most notably though, it is putting more investment in those places than its movie division.
Disney’s streaming services are also a point to consider.
Disney recently announced that its ESPN+ service has brought in 1 million subscribers. They each pay $5 per month.
However, ESPN lost two million subscribers and each of those people had been paying $9 per month.
Disney is going to launch Disney+ and, like ESPN, it is going to cost less than alternatives like Netflix [NASDAQ: NFLX].
The new streaming service (due to launch in late 2019) will include all the animated favorites for which Disney is known as well as the Star Wars movies, the Marvel moves, Fox favorites, originals, and more. It is a bold move.
After all, Disney is the majority shareholder of streaming service Hulu, but Bob Iger says that Hulu will still benefit from the more “adult-oriented” assets that Fox owns.
Disney has a 52-week range of $97.68 to $120.20 with a dividend yield of 1.59%.
Morgan Stanley is excited about Disney’s prospects for 2019. Their analysts set a $135 price target on the stock.
Obviously, Netflix [NASDAQ: NFLX] could take a hit with Disney starting its own service.
While the company has dominated the streaming media space for years, it has been losing traction to Hulu and Amazon’s Instant Video.
Losing third-party content like Disney and Marvel could really hit Netflix where it hurts. But Netflix CEO Reed Hastings isn’t worried.
Netflix [NASDAQ: NFLX] owns the Daredevil and Jessica Jones tv shows Disney is under contract to produce them for Netflix until cancelled.
Also, Netflix has deals in place with Fox for different assets.
Most importantly though, Disney’s divide-and-conquer strategy let’s Netflix see whether the strategy works. “So, our view would be to let them try to innovate on those aspects, watch what they do and learn from consumers,” said Hastings. “If it works, then we get to learn from that.”
The company has a 52-week range of $231.23 to $423.21The company’s share price has been climbing exponentially since it experienced a few losses in 2011 after a surprise price increase on its subscriptions.
Netflix tripled its subscriber count from 2012 to 2016, and now in 2019, Netflix is concentrating on pursuing new markets so that it can continue its meteoric climb.
The company has also been making a big push towards original content, and some of it has been super successful.
Netflix originals let the streaming service offer fresh titles without having to license as much third-party content, but that strategy only works as long as its subscribers would rather watch Netflix originals than old favorites and newer releases from their favorite movie studios. It’s a gamble.
Netflix [NASDAQ: NFLX] currently has a one-year analysts target of $394.21 and does not pay a dividend.
In the battle of Netflix [NASDAQ: NFLX] and Disney [NYSE: DIS], the question really isn’t which one is better. Like the subscribers to their streaming services, you don’t have to choose just one of these movie stocks.
Disney is making some big strides. Video streaming services tailored to specific interests could be a real boon for the company. That added to its successful theme parks efforts and Disney could emerge as a real force, but investors should be aware of the company’s strategy.
Netflix is banking on international markets and original content. That strategy comes with its own risks, but the rewards could be high if consensus estimates are right.