Instead of buying rising streaming stocks like FuboTV, consider Netflix and this cheap Dow Jones dividend stock.

FuboTV (NYSE: FUBO) has been in the spotlight after its shares skyrocketed by as much as 38% in a single week. But the streaming company continues to lose money, with analyst consensus estimates calling for further losses in 2025.

Here’s why Netflix (NASDAQ: NFLX) and Walt Disney (NYSE: DIS) stand out as the best buys in the streaming industry.

Netflix has grown for good reason

Netflix is ​​now worth nearly double Disney — but it wasn’t always that way.

Netflix surpassed Disney in terms of market capitalization for the first time in 2018. However, investor optimism after the launch of Disney+ helped Disney take the lead in 2021. Netflix fell below $100 billion in market cap in early 2022 due to extensive selling of growth stocks. and has since tripled from this low.

Netflix’s business model has changed a lot over the years. It started by shipping DVDs, then moved on to licensing and digitizing content from third parties, and eventually started producing its own content to build its intellectual property.

Producing content in-house gives Netflix more control, but also puts a lot of pressure on it to have successful shows, keep subscribers engaged and justify price increases. If there are too many flops, customers may leave the platform.

Netflix hasn’t always had a winning formula. But it has learned from its mistakes and found a solid balance between producing its own content, licensing content and integrated advertising options so that users can choose a less expensive subscription. Netflix has successfully done away with password sharing — which has helped boost subscriptions.

Netflix’s operating margin is at a record high as it grew sales faster than operating expenses. Over the past five years, sales have grown 92.3%, while operating expenses have increased 51.2 — boosting operating margin to an impressive 23.8%. For context, Netflix’s operating margin was below 10% before the pandemic.

Netflix is ​​at the top of its game, but the excitement is reflected in its stock price — which is hovering around an all-time high. Netflix recently had a forward price-to-earnings (P/E) ratio of 36.4 — not cheap at all. However, it is a top growth stock that could be worth the premium price if you have the risk tolerance to endure the volatility.

Disney is turning the corner and the stock is cheap

While Netflix has done a masterful job of fine-tuning its business model and disrupting traditional media over the years, Disney has faced the difficult task of using new ideas without completely destroying its franchises. legacy businesses.

The launch of Disney+ in November 2019 was a major step forward and showed that Disney was willing to take losses in the medium term in its quest to build something that would last.

The story continues

Disney has long relied on box office hits and its library of classic films loved by people around the world. But if Disney+ subscribers can watch a movie for free months after its theatrical release, then there’s less incentive to go to theaters — especially given the quality of home streaming today.

Pressured to make every theatrical release a smash hit, Disney has been criticized for producing content just to make a profit and offset Disney+’s losses. The same is true of the theme park business, which raised the prices of tickets, concessions and merchandise and was a good example of the impact of inflation on consumers.

So while Disney+ finally turned a profit a quarter earlier than expected, it still hasn’t found the perfect plan for how much to spend on Disney+ pure-play content or theatrical releases — which is why the content slate relied heavily on much on sequels and hit franchises like Marvel, Star Wars, Toy StoryAnd so on

There is also the matter of succession planning. Bob Iger was Disney’s CEO from 2005 to 2020, then returned in 2022 to replace Bob Chapek — whom he handpicked to run the company. Iger made it clear that his stay is temporary and he wants to make sure the next CEO is the right fit. But that’s a big question mark for a company whose past is littered with management changes — including a potential hostile takeover that was barely quelled when Michael Eisner and Frank Wells restored order to a struggling Disney in the early the 1980s.

Just as the market rewarded Netflix for meeting many key goals, it punished Disney for all the uncertainty. The stock is just 15% off its 10-year low and down 55% from its all-time high.

With a forward P/E ratio of just 18.4, Disney may appeal more to value-oriented investors. This long-lasting component a Dow Jones Industrial Average it also reinstated its semiannual dividend — though it’s only 1% now. However, investors can expect Disney to raise its dividend if its business improves.

Disney could benefit from an increase in consumer spending, with interest rates expected to fall. In the long term, Disney has several ways to monetize its content troves, such as through theaters, streaming, cruises, performing arts and in-person experiences in the parks. Now could be a great time for investors who believe in Disney’s turnaround to buy the stock while it’s in the bargain bin.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Daniel Foelber has positions in Walt Disney and has the following options: Short September 2024 $95 Walt Disney calls. The Motley Fool has positions in and recommends Amazon, Netflix, Walt Disney and fuboTV. The Motley Fool has a disclosure policy.

Instead of buying rising streaming stocks like FuboTV, consider Netflix and this cheap Dow Jones dividend stock was originally published by The Motley Fool