Many companies have been giving investors positive updates over the past few weeks. Inflation seems to be moderating, and strategic efforts to combat it are showing results. Two prime examples are Amazon (AMZN 0.89%) and Walt Disney (DIS 0.15%), which recently wowed investors with their strong performances.
Both stocks are up this year, with Amazon gaining 15% and Disney's well-received update sending its stock up 20% since the start of 2024. These two stocks are on a roll. But which one is the better buy today?
The case for Amazon: Way above the competition
The case for Amazon is pretty simple. It has no competition. Its two main businesses, e-commerce and Amazon Web Services (AWS), are way above any competitors. According to Statista, Amazon has 37.6% of the U.S. e-commerce market, with its closest competitor, Walmart, at only 6.4%. AWS has 31% of the cloud computing market, with its closest competitor, Microsoft's Azure, at 24%.
Current performance doesn't necessarily mean that things will stay status quo, but Amazon is investing in both businesses to maintain its lead and ensure strong future growth.
Its new regional network is getting items to customers faster and at lower prices, since products have to travel fewer miles. It also expanded its same-day facilities, and items delivered overnight increased 65% year over year in the 2023 fourth quarter. Amazon's logistics network is unbeatable, so there's very little room for anyone to compete with Amazon in speed. That makes it more likely customers will keep turning to Amazon for essentials and more.
In AWS, Amazon has launched a large assortment of generative artificial intelligence (AI) services that help client companies work faster, with better results. It's booking deals for longer commitments with clients like Nvidia and Salesforce, and this high-margin business should add high value to the Amazon whole for many years.
Its other businesses are ramping up as well. Advertising is its highest-growth segment right now, with a 26% year-over-year sales increase in the fourth quarter, and its streaming and healthcare businesses are also making progress.
Trends are working in Amazon's favor in the short term, and it's padding its moat to keep it in its dominant position in the long term. It's a classic case of how winners keep on winning.
The case for Disney: All of its parts are working together
Disney's business doesn't have the same breadth as Amazon's, but it's also a collection of working parts in a robust entertainment machine. After several years of pressure in differing segments, it looks like everything is starting to fall into place to work together.
In its fiscal 2024's first quarter (ended Dec. 31, 2023), parks revenue increased 7% over last year, and streaming sales were up 15%. Revenue was hampered by declines in linear networks, which comprise Disney's broadcast and cable channels. But the big story was the improvement in streaming losses, which contracted from nearly $1 billion to $138 million. That inspires confidence that Disney can come through on its commitment for streaming to become profitable by the end of the fiscal year.
With high-performing parks and streaming, Disney can get back to serious growth. CEO Bob Iger has also committed to getting content creation under control after several flops last year and concerns that the company is producing too fast, leading to lower quality. Disney has reduced volume, specifically at Marvel Studios, and it had six out of the top 10 streamed movies in 2023.
Another thorn in Disney's side has been ESPN. Up until now, the company hasn't made a strong effort to turn ESPN+, the streaming network, into a fully loaded channel, since much of that content is already on its cable network. But it announced a deal together with Fox and Warner Bros. Discovery last week to create a collective sports channel. It's also launching a separate ESPN network with an array of digital services to enhance the overall sports experience.
Disney is well-positioned to leap forward this year and continue to gain in the future.
Which is the best stock to buy right now?
Both of these companies have large businesses with many moving pieces and are at the top of their respective industries. They are both reporting strong performance.
Investors were more impressed with Disney's report since it demonstrated incredible progress. Amazon's was more of the same, which doesn't make it less impressive, but it didn't result in the same post-earnings jump.
Amazon and Disney stocks are both likely to perform well this year and in the future. However, I see Amazon as having an edge. It has a wider range of businesses and is more reliable for growth and profits. But either one of these, or both, could have a place in your portfolio.
