The streaming wars are sizzling, and there is debate about how many of the streaming providers will be around when the dust settles. However, you would be hard-pressed to find a case made where either Disney+ or Netflix (NASDAQ:NFLX) is not one of the survivors.

Netflix has the first-mover advantage in the streaming wars, but Disney (NYSE:DIS) has been around producing content for almost a century. The history of the companies is important, but let's look to the future and consider which will make a better investment.

A family streaming content in the living room.

Image Source: Getty Images.

The case for Disney

Disney's theme parks and media business provide it with billions in annual cash flow that it can use to invest in its new streaming offerings. That's a luxury Netflix does not enjoy. Instead, Netflix must rely on the debt markets to raise capital to invest in new content and necessary expansion costs. Furthermore, the value of Disney's theme parks should increase as Disney+ gains popularity worldwide, because audiences from around the world will have increased exposure to the brand. It's an excellent complementary benefit unavailable to Netflix.

Some of Disney's content has been around for decades and is still generating revenue, proving its durability. In 2019, Disney released seven films that topped $1 billion in global box office revenue. Its 2019 film slate also received 23 Oscar nominations. In addition to generating billions in revenue for Disney at the box office, these films will be available on Disney+, where they will attract subscribers.

In short, Disney's theme parks are a source of stable cash flow with a strong moat. Furthermore, the company's proven ability to create quality content that lasts for generations will give it an advantage over Netflix. All the while, Disney will be encroaching on Netflix's market share in the streaming space with Hulu, Disney+, ESPN+, and Hotstar.

The case for Netflix

Netflix released its Q4 results on Jan. 21, and it reported 31% revenue growth for the quarter. The growth story is the major attraction of investing in Netflix. Last quarter was not an anomaly; Netflix has consistently achieved strong top-line growth for many years. It has increased revenue at a remarkable 29% compound annual growth rate (CAGR) over the last five years.

Netflix already boasts 167 million global streaming paid memberships, a number that Hulu and Disney+ may never reach combined. Furthermore, its monthly average revenue per user is over $10. Within a few years, this sizable existing user base should produce enough cash to cover Netflix's continued investments in content.

Furthermore, as the availability of broadband internet speeds expands worldwide, so will Netflix's growth opportunities. Since nearly all its revenue comes from streaming subscribers, the easier and faster internet access becomes, the more people will be able to stream its content. The number of people worldwide without internet access has been dropping, but it's still over 3 billion. The increase in internet users represents a significant market opportunity for Netflix.

Based on its expected growth, Netflix shares are selling at a price-to-earnings-to-growth (PEG) ratio of 1 compared to Disney at 1.8, making it a better value according to this ratio. 

However, on a more sobering note, Netflix burned $3.3 billion of cash in 2019. It's still years away from gaining enough scale for its subscription revenue to far outpace the necessary content investments (enabling high free cash flow), and there is a risk that it may never achieve this goal.

The better investment

Investing in Disney gives you access to the growth opportunity of streaming TV with less downside risk, because it's generating more than enough money from its other businesses to fund growth in the streaming business. Furthermore, Disney is trading at a forward P/E of 23, compared to Netflix, which is selling at 42 times its projected 2021 earnings. The difference in the P/E is more significant than the advantage Netflix has in its lower PEG ratio.

Netflix, like many growth stocks, is reporting incredible growth in revenue and its subscriber count. However, that growth comes along with billions in negative free cash flow and a dependence on debt to fuel that growth. If you have to pick only one to invest in, it should be Disney.