Why Netflix's beat-and-raise quarter is welcome news for Disney investors

CNBC

18-07-2025

Strong earnings from streaming king Netflix on Thursday sets the stage for Disney to shine with its results in a few weeks. Netflix reported an upbeat quarterly results after the bell Thursday, with revenue soaring 16% year over year, its seventh straight quarter of double-digit growth. The streaming service also delivered beats on operating income, earnings per share and free cash flow, and raised its full-year revenue guidance. (Shares were down Friday on Netflix warning that its operating margin would be lower in the second half of 2025). While the results certainly keep Netflix atop the competitive streaming industry, they also provide a good read-through for Disney, which has been hyper-focused on growing its streaming platforms — Disney+, Hulu and ESPN+ -- as its traditional TV business remains challenged. Indeed, Netflix reported "healthy member growth" — Netflix no longer discloses quarterly net member adds — proving consumers are still willing to pay for streaming entertainment. But it also found success with higher pricing for its products and revenue from its new ad-supported services. That higher pricing is welcome news for other streamers, including Disney, which has raised prices for Disney+ ad-supported and ad-free plans, as well as for its bundles which combine Disney+, Hulu and ESPN+. The uptick in ad revenue at Netflix demonstrates that major streaming platforms like Disney+ can raise prices and grow advertising income without losing subscribers, proving that customers are willing to pay up for premium content, and that ad-supported models can help diversify revenue streams. In related news, NBCUniversal's streaming service Peacock just announced Friday that it is raising prices by $3 per month for its ad-supported and ad-free tiers. The price hikes come after a surge in subscribers for the latest season of "Love Island" and in anticipation of its NBA broadcast package beginning this fall. (NBCUniversal is the parent company of CNBC.) Ahead of Disney's third quarter on Aug. 6, UBS estimated double-digit earnings per share growth will continue, buoyed by resilient demand at the company's theme parks and similar improvement in direct-to-consumer profitability. They note concerns that the opening of Universal's Epic theme park in Orlando appear to have been overblown. The analysts raised its price target on Disney stock to $138 a share from $120 earlier this week. After a big move off their April lows, shares have been rangebound as investors wait to hear more about streaming profitability improvements, the strength of its parks and experiences business, and management's plan to mitigate declines in linear TV. The stock is trading roughly 1% lower at $121 per share Friday. Disney is a "show-me stock," Jim Cramer said Thursday on "Squawk on the Street." "People want to see the Disney+ numbers and see that there really is a breakout because there's been so much distrust about anything that's involved with linear [TV]," he said. "No one seems to get their way until they see the numbers. I think the numbers are going to come through and the stock's going to look cheap. I'm a believer." Of course, we don't sacrifice our discipline even when we have faith that Disney will be able to move higher over time. We trimmed our position on June 27 to capitalize on that big run. Now, we're waiting for earnings in a couple weeks for a business update. We maintain our price target of $130 and 2-rating on the stock. (Jim Cramer's Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.