It doesn't seem right to pit Amazon.com (AMZN -1.60%) against Disney (DIS -0.75%) these days. The online retailing giant is at the top of its game, hitting another all-time high on Tuesday. It's the third most valuable company in the country by market cap. The House of Mouse hasn't been as fortunate. A few of its key businesses are currently inoperable, and the stock is trading well below the highs it set just before Thanksgiving of last year.
But the investing decision isn't just about buying the biggest company or the one that's running on all cylinders. The market's already pricing in the known fundamentals. Making the best call for your portfolio often boils down to which company you feel will do a better job of providing positive surprises in the future. Let's take a deeper dive into both companies to see where we're at on Amazon and Disney.
Image source: Disney.
A whole new world
Let's start with a question that 9 out of 10 investors would probably get wrong. Which company do you think posted higher revenue growth over the past year? It's not Amazon, with its 22.7% top-line increase over the past four quarters. Disney has delivered 30.9% growth over the past year, but that's only because of the $71.3 billion deal for the film and TV assets held by Twenty-First Century Fox that inflated until March of this year.
In reality, Disney is a plodder. You have to go back to fiscal 2004 (15 years ago) to find the last time that it posted double-digit revenue growth before its acquisition-padded production in fiscal 2019. Amazon has been a rock star. It has never posted single-digit growth on the top line, even when the dot-com bubble popped two decades ago or the subprime lending crisis plunged us into the Great Recession of 2008. Today's pandemic-peppered reality also hasn't slowed Amazon; if anything, it has provided the catalysts for growth to accelerate.
Amazon is shining these days. More consumers are shopping online to avoid local store visits. Amazon's digital video, music, and books are keep homebound folks entertained. Businesses turning to the cloud are keeping Amazon's AWS platform busy.
Disney is in a different place right now. Disney+ is doing fine, and even ESPN has seen some ridiculous spikes in viewership for its NFL Draft coverage and Michael Jordan documentary series despite a lack of live sports. But step outside of Disney's digital and media networks properties and it's pretty disheartening. Its domestic theme parks will remain closed through at least mid-July. Disney put out the country's six highest growing movies last year, but with multiplexes across the country closed or restricted in capacity, the studio has had to push out the release dates of a slate that would've fallen short of last year's haul anyway. Licensed apparel sales and Disney's namesake retail stores are also understandably faring poorly right now.
I own Disney personally. I don't own Amazon. However, I have to go against my own portfolio. Amazon is the better investment at this point. We're also officially in a recession now, and that's fertile soil for Amazon's growing collection of offerings. Disney as a premium brand with premium-priced products isn't going to fare as well. It will take a couple of years before its theme parks are back to business as usual financially, and one can argue that the movie studio model will never be the same.
Disney is still the undisputed champ in family entertainment, and it may very well wind up beating the market from its current depressed state. But even at loftier valuations and trading at all-time highs, Amazon is the better buy right now.
