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Disney’s shares soar, but can it really take on Netflix?

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Disney's subscribers are surging, while Netflix has had a disappointing quarter, but can the content creator chase down Netflix?

Netflix is currently the undisputed king of streaming services, but for the first time it is struggling to grow, at the same time when its rivals are getting stronger.

Netflix added 8.3 million new subscribers last quarter, bringing its total subscribers to 222 million. But it was an unexpected result with shares falling more than 20% after the company said it expects 2.5 million new subscribers next quarter.

While Netflix falls, Disney is taking advantage.

For the first time, growth in new customers has surpassed its rival.

Disney CEO Bob Chapek reaffirmed the company's target of reaching 230 million to 260 million Disney Plus subscribers by 2024. The company added 11.8 million Disney Plus subscribers globally in the last quarter.

As it stands Disney has 129.8 million Disney Plus subscribers globally, including India's Disney Plus Hotstar, which accounts for 45.9 million of the total.

Smashing Wall Street's expectations

Overall, it was a stellar result for Disney.

With an expectation of US$0.57 per share on revenue of US$20.84 billion, Disney impressed. The company actually had earnings of US$1.06 per share and revenue of US$21.82 billion.

As eToro's analyst Josh Gilbert said the company is outperforming in various revenue segments.

"Kicking off 2022, this report offers a lot of positivity for Disney investors, following its weak earnings last quarter. With park revenues returning to pre-pandemic levels, overall company earnings climbing by more than 200% and Disney Plus subscribers continuing to soar, Disney is returning as a conglomerate powerhouse," he explained to investors.

Short-term pain for long-term success

While Disney is making moves to become top of the streaming services, it is coming at a cost.

As Gilbert stated, in order to grow, it is going to cost Disney over the short term.

"Disney Plus is anticipated to continue its expansion into new markets during the next few years, including the Middle East and Eastern Europe, aiming to reach more than 100 million people."

"Disney intends to spend US$33 billion on content in 2022, which will likely boost its long-term growth, but consequently impact short-term profitability. Furthermore, this should aid its main goal of reaching 230 million subscribers by 2024," Gilbert concluded.

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