Morgan Stanley came out with a mega wrap on the media space, highlighting Disney and Netflix as two of its favorite plays into the end of the year.
Analysts at the firm see a stronger content slate for both in the fourth quarter that should give the stocks a lift.
But, both names have underperformed this year, falling roughly 3% in 2021.
CNBC’s “Trading Nation” asked its traders which streaming stock they’re betting on in the third and fourth quarters — the diversified entertainment stock in Disney or the pure play in Netflix?
“I actually own both, but I am more attracted to Netflix. I have more shares and more allocation towards Netflix,” New Street Advisors founder Delano Saporu said Wednesday.
Saporu said the subscriber growth that had been pulled forward and subsequent “lumpiness” in subscriber numbers should ease, and that management has tempered expectations for future counts. That then gives Netflix the “ability to surprise to the upside” in its next quarterly report, he said.
“There’s a lot of opportunities for investors to buy for the long term, especially looking at [the fact] they’re trading nine times sales and 53 times earnings on a trailing 12 months basis, so I really like Netflix. I think there’s a lot of reasons that investors should be excited,” said Saporu.
Like Saporu, Miller Tabak chief market strategist Matt Maley believes in both companies over the long term. However, he sees one as having an edge.
“I just like the potential here of Disney a lot on a technical basis. I also like the fact that it’s more diversified and the market is a little expensive here so if we get some hiccups in the market, it will give us a little bit more downside protection,” Maley said during the same interview.
He said the stock is setting itself up for a similar trading pattern as it saw last fall — bumping around its 200-day moving average before breaking higher.
“If it does break meaningfully below that 200-day moving average, it’s going to raise a big yellow flag and it’ll change my stance on the stock. However, if you saw what happened last fall, when it finally broke above that 200-day moving average in a meaningful way, … it exploded to the upside and rallied 50% over the next four or five months,” he said.
Disney’s 200-day moving average sits just above $177. It closed Wednesday at $174.74. Maley added that a break above $184 would attract “momentum money” and drive the stock to the upside.
Disclosure: New Street Advisors holds NFLX and DIS.
