In January, AP News reported that inflation had eased for the sixth month in a row, declining to 6.5% in December compared to the year before. The improvement has set the stock market on a road to recovery, with the Nasdaq Composite up 13.7% since Jan. 1.

As a result, consumer-reliant companies such as those in the entertainment and streaming industries have enjoyed significant stock growth this year. For instance, Netflix's (NFLX 4.17%) stock has risen 25% year to date, while Walt Disney's (DIS 1.54%) has enjoyed a gain of 32% in the same period.

With both stocks now on the upswing, they might be worth considering for your next investment. So is Netflix or Disney's stock the better buy? Let's take a look.

Netflix

Netflix started the new year on the right footing, adding 7.66 million subscribers in a quarter during which its biggest competitor, Disney+, lost 2.4 million. On paper, Netflix's total subscriber count of 230.75 million is still lower than Disney's 234.7 million (from Disney, ESPN+, and Hulu).

However, subscriber count has become an increasingly murky metric, with average revenue per user (ARPU) proving more telling. As of the fourth quarter of 2022, Netflix's monthly ARPU stood at $11.76, while Disney+'s domestic ARPU was $5.95, ESPN+'s was $5.53, and Hulu's was $12.46 (an average of $7.98).

While Netflix's streaming business is clearly pulling in more cash than Disney's, Netflix doesn't have the luxury of falling back on a variety of other revenue sources in the case of a market downturn. The majority of Netflix's revenue is tied to streaming memberships, and recent efforts to boost earnings, such as the launch of its ad-supported tier and crackdowns on password sharing, are still dependent on subscribers sticking around.

Regarding the company's password crackdowns, a recent survey by investment firm Jefferies using 380 participants showed 62% of Netflix password borrowers would stop using the platform, while 10% would create a new account for $9.99 per month. The figures coincide with the recent intense backlash from consumers over the crackdowns.

Disney

Disney has faced two years of depleted revenue from theme parks and box offices during the pandemic and an economic downturn in 2022 that made growing its streaming business challenging. However, the company will likely come back strong. 

In Q1 2023, Disney's revenue grew 8% year over year to $23.51 billion, beating Wall Street expectations by $230 million. Meanwhile, operating income declined 6.5% to $3.04 billion. The reduction came from Disney's media and entertainment segment reporting $10 million in operating losses, while its parks segment reported a 25% year-over-year rise in operating income of $3.05 billion. 

While Disney's streaming business is still bleeding its media segment, the company's ability to beat total revenue forecasts shows the strength of its varied income sources. Since reopening, Disney parks have managed to help keep the company growing.

Additionally, the entertainment giant's current quarter will likely enjoy boosted media earnings from Avatar: The Way of Water, which has already earned $2.1 billion globally to become the sixth-highest-grossing film ever, and the release of Marvel's Ant-Man and the Wasp: Quantumania on February 17.

Disney's streaming business still has a mountain to climb before it reaches profitability. However, the solid return of parks and cinema guests makes Disney a more diverse and reliable business than Netflix over the long term. Additionally, Disney's forward price-to-earnings ratio of 27 compared to Netflix's 32 means the House of Mouse's stock is currently a better bargain.

As a result, Disney's stock is a better buy than Netflix's this February.