Microsoft Stock Vs Disney: Which Is Best?

Microsoft Corporation (NASDAQ:MSFT) and Walt Disney Co (NYSE:DIS) are major components of the Dow Jones Industrial Average (DJIA). While largely operating in different spaces, they do have some overlapping exposure in both digital and brick-and-mortar businesses. Each company dropped in value when county lockdowns were imposed and both had to pivot their business models to various degrees in order to adapt to the changing economy.

While Disney struggles with forced closures of its theme parks and limited releases of its content, Microsoft is fending off competition from startups like Zoom (ZM) who muscled in on its productivity tools.

If you want a stable long-term investment, both companies have solid track records of success. But which is the better investment between Microsoft stock vs Disney?

Microsoft is at a historic high market cap, while Disney still hasn’t rebounded to its pre-coronavirus trading levels. However, they’re both beloved by long-term investors and have the resources to weather the storm. We’ll put Microsoft (MSFT) under the microscope first.

Will Microsoft Stock Rise On Acquisition Spree?

Microsoft shares rebounded to trade above $200 within months after first nosediving to $132.52 when the economy was first shut down. It reached an all-time high value of $232.86 per share.

MSFT market capitalization is $1.52 trillion at a $200-per-share valuation and its P/E ratio of 33.07 percent shows it may be fairly priced.

Much of the company’s success came from CEO Satya Nadella’s “mobile first, cloud first” strategy to compete with Google (GOOG), Amazon (AMZN), and SAP in the 2010s.

The company also experienced a temporary cyclical boost in sales of its Surface mobile devices and OEM Windows laptops as society moved toward a work-from-home lifestyle.

Adding to the buzz, Microsoft’s latest generation Xbox consoles released in 2020. The launch of the Xbox Series S and Xbox Series S was preceded by a sold-out presale that fueled bullish investor interest.

The company also went on a buying streak, purchasing several 5G networking companies, game developer ZeniMax Media, and Orions Systems, which gave it the Dynamics 365 CRM platform to compete with Salesforce (CRM) and bolster its Azure platform against Amazon.

The company raised its quarterly dividend from $0.51 to $0.56 by the end of 2020, giving it a 1.01 percent annual dividend yield. These moves put investors in a generally bullish mood toward the stock, which drove prices up until the election week turmoil. This got some analysts interested in Disney instead.

Disney Dividends Suspension Is A Concern

Disney shares were at an all-time high circling $150 when the crash hit, dropping it to a 52-week low of $79.07.

It has since pulled itself back above $100 and has been stuck in the $120 to $140 range for the back half of the year. DIS market cap is still comfortably over $200 billion.

Shareholders had received a 1.46 percent annual dividend yield until it paused these payments in 2020. Of course, dividend payments are the least of the company’s worries, as profits dropped to a low of $2.61 per share in its third fiscal quarter ending June 2020. The fourth quarter is unlikely to be any better.

The company is struggling to keep up with expenses as the coronavirus affected its stores, theme parks, cruises, and even movie and TV productions.

It was forced to lay off 28,000 employees by the end of September. Regal Cinemas shutting down for the remainder of 2020 led Disney to change its movie release model to focus on a digital-first launch.

Disney’s Mulan and Pixar’s Soul were moved from theatrical releases to Disney+ exclusives. This streaming service is one of the few bright spots in a dark year for the company.

Although it’s facing problems now, the company has $23 billion in cash on hand and plenty of heavy-hitting content in production.

Its 2019 acquisition of Fox gives it majority control over Hulu too, giving the company a powerful one-two punch to fight its way back up to its former glory.

Microsoft Powers The 4th Industrial Revolution

There is little doubt the tech sector will thrive for the rest of the century and beyond. Artificial intelligence (AI) and the Internet of Things (IoT) are at the heart of the Fourth Industrial Revolution, in which automation is optimizing all workflows throughout the supply chain.

From industrial warehouses to inside your own home, these technologies are streamlining everything we do.

Microsoft is still a foundational part of this brave new world, but more people are now familiar with Apple and Android operating systems (OS). And the U.S.-China trade war provoked Huawei to develop its own competitor.

From the OS to gaming, cloud-based applications, and beyond, Microsoft is constantly under attack from the best in the business, and Zoom (ZM) proved even a small startup with one app can break its seemingly impenetrable armor.

Dangers of Investing in Disney

Disneyland is no longer the happiest place on earth, and the company lost $3.5 billion in the third quarter alone not least due to closing theme parks.

And while taxpayer subsidies of Hollywood productions are nothing new, giving this company a bailout on the heels of its successful Disney Plus streaming launch is a hard pill for many legislators to swallow.

The company has plenty of Star Wars, Marvel, and Pixar projects to maintain interest, and professional sports continuing in bubble leagues helped ESPN recover its audience, but how much magic is left to pull?

The dream exit strategy should this storied studio get into trouble would be for Apple to buy it out and merge with its ecosystem as a tribute to co-founder Steve Jobs.

He sold Pixar to the House of Mouse because he believed in it just like Stan Lee and George Lucas after him. The force is strong with Disney.

Disney Vs Microsoft Stock: The Bottom Line

Disney and Microsoft are components of the Dow Jones and S&P 500 indices. While they may not seem related, they have a long history of working both together and against each other through the early ages of the internet.

Disney uses Linux and Apple-based computers for much of its computer animation, and its Pixar studio was once owned by Steve Jobs, whose rivalry with Microsoft co-founder Bill Gates is the stuff of legends.

Microsoft is reaching all-time high market valuations in the wake of the coronavirus while Disney struggles. One can only wonder if Apple will step in to help rebuild the House of Mouse. Do you believe in magic?

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.