Netflix Is More Recession-Proof Than Disney, Here’s Why.
There are various reasons for recessions, but one in particular sticks out right now. According to the National Bureau of Economic Research, a recession can result from an overheated economy in which demand exceeds supply, resulting in price inflation.
That scenario is strikingly similar to what is currently happening in the US economy. Prices for secondhand autos, gasoline for your car, and vacation stays are all increasing. In August, the US Bureau of Labor Statistics reported a 5.3 percent change in the consumer price index over the previous 12 months.
Although we are just emerging from a recession brought on by the epidemic, the economy is susceptible to another downturn in the not-too-distant future. Here are some reasons why Netflix’s (NASDAQ:NFLX) business might outperform Disney’s (NYSE:DIS) during the next downturn.
Netflix only has one business segment: streaming services, which vary in price depending on where you live. It is common in all locations to be able to subscribe for less than $1 per day. It has enough content to keep the whole family entertained, and it is continually updated with new and changing movies and shows. As a result, if your income drops during a recession, one of the last things you’ll probably quit is your Netflix subscription.
Disney, on the other hand, has a diverse business portfolio that includes theme parks, resorts, cruise ships, and products in addition to its streaming services. It’s no secret that a Disney theme park visit can be costly. Anyone who has had a family vacation to one of those knows what I’m talking about. When family budgets are declining during a recession, a vacation to a Disney park is more likely to be postponed or canceled entirely.
It’s a tendency that Disney suffers from more than Netflix. Despite the fact that Disney’s theme parks were severely curtailed in the most recent quarter, the segment nevertheless contributed 34% of the company’s total revenue. Sure, going to Disneyland or Walt Disney World is great, but when money is tight, the most entertaining thing isn’t always the best option. Unlike during booms, people in recessions want the cheapest alternative. As a result, Netflix is more recession-resistant than Disney.
This is something to keep an eye on if you’re a Netflix or Disney fan. If you own Disney stock, keep in mind that during a recession, revenue may temporarily decline. This understanding should help you deal with the heightened volatility in Disney’s stock price throughout that period. Brief News from Washington Newsday.