Netflix, Disney stocks hit 52-week highs. Here's why.

Shares of Disney (DIS) and Netflix (NFLX) are trading to new heights, reaching 52-week highs. Disney's stock is being propelled by the successful implementation of the company's turnaround plan, robust free cash flow generation, and strategic partnerships within sports streaming. Meanwhile, Netflix's stock is thriving due to subscriber growth, increased revenue streams, and the recently announced collaboration with WWE to explore gaming opportunities.

Yahoo Finance's Alexandra Canal breaks down the details.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Angel Smith

Video transcript

SEANA SMITH: Two stocks that we were watching here this morning and that's Disney and Netflix. Both of those names hitting fresh 52-week highs this week. Now we have seen two though very different narratives play out at these two companies so far this year.

So we want to bring in Yahoo Finance's Alexandra Canal, here to explain some of that action. And Allie, let's start with what you're seeing from Disney.

ALEXANDRA CANAL: Yeah. So Disney-- a very interesting story considering last year we were at multi-year record lows, but we're hitting that 52-week high, shares trading just above 120 bucks a share.

Year to date, they're up 34%. If we take a look at a year chart, they're up 27% I would say. And you're seeing those multi-year record lows happening around the fall of last year. And there's a full reason why-- a few reasons why analysts and investors are pretty bullish on the stock at large.

So let's tick through some of those reasons. Number one being the fact that the turnaround plan that we're seeing from Bob Iger, it's beginning to take shape. We've seen the purchase of Hulu, which a lot of analysts on Wall Street think is going to be really lucrative when we think about subscriber acquisition.

Hulu has a lot of really great programming. That if you pair that with Disney Plus, it's a really attractive offering for consumers. We've also seen Bob Iger really double down on the fact that they want to produce quality content over quantity.

They've already scrapped some projects there. And they also are committing to different initiatives like the password sharing crackdown. Bloomberg Intelligence was out with a report that the password sharing crackdown could add $2 billion in revenue for the company.

So that's certainly a positive moving forward. And that's all contributing to really strong guidance when we think about earnings and free cash flow. That is important because it really is about profitability at the end of the day.

Barclays recently upgrading Disney and they said that they expect Disney Plus and the company streaming services to be profitable before the target date. Disney says that by the end of 2024, Disney Plus will be profitable. Barclays thinks that could be sooner.

And then finally, we have a lot of really great partnerships coming up with Disney, especially as it relates to sports, as it relates to gaming. We know, Disney has been doubling down on its sports initiatives. It's going to launch its ESPN fully over-the-top service next fall-- so 2025.

They are still searching for a partner there. But that could be an interesting move depending on who they go with. Perhaps if they partner with an Amazon, that could be something to watch. And then they also have that partnership with Warner Brothers Discovery and Fox coming out later this fall. That's the skinny sports bundle there.

And so, we're seeing when it comes to what Wall Street is saying, 28 buys, seven holds, two sells. Of course, we're one week out from that heated proxy battle with Nelson Peltz, a shareholder meeting in a week from today. That's going to really determine where that stands.

So we could see some volatility leading up to that, but it seems like Disney is in a pretty strong position at the moment going into that meeting.

- And Ali, another stock I know you're watching this morning is Netflix. We have news about a price target change Wedbush removing the stock from their best ideas list. What's going on with Netflix today?

Yeah. So Netflix also hitting 52-week highs. If we take a look at the year-to-date performance, we're seeing the stock up also about 27%. I want to take a look at a two-year chart. Because post-COVID, Netflix really struggled.

They added a bunch of subscribers during that stay-at-home trade. But as the COVID trade sort of waned, we saw that really hit the stock price. But they have certainly climbed back. And I do think that the concern here from Wedbush is that a lot of these initiatives are already priced into the stocks, but there's still a lot more room to run here.

So let's tick through some potential upside reasons why Netflix is doing so well. One is healthy subscriber growth. We've seen them continuously add subscribers over the past few quarters. Now a lot of this has to do with the password sharing crackdown, which I'll get into in a minute.

But also, the fact that they've just been producing really solid content. Not just at home, but also overseas. They've been really committing to international investments, doubling down on their localization strategy and that's helping them with emerging markets.

I mentioned the password sharing crackdown. That I think is the issue where some analysts are saying that's largely priced in at this point. But we have another revenue driver and that is the advertising tier.

And by 2025-2026, we're going to see Netflix see some really significant growth in the ad tier that's going to add to revenue and then when you think about their partnerships, they have the WWE live partnership.

They're really expanding into live programming. They are doing more investments when we think about gaming. So the future is bright for a company like Netflix. They are targeting margins above 20%.

They certainly have a lot of optimism on the street with 40 buys, 16 holds, and just three sells. So another company that we're watching very closely and we'll have to see where things go. They report earnings in mid-April. So we'll get yet another update very soon.

- And another season of busy earnings for you to cover, Ali. Thank you so much. Really appreciate your reporting as always.