Profits don’t matter for investors anymore, only whether a company can beat Amazon or Netflix

The stock market is saying internet giants are eating the world and companies need to figure out how to survive their onslaught in the new digital age.

Amazon and Netflix shares are up 52 percent and 58 percent respectively through Thursday compared to the S&P 500’s 15.5 percent gain.

Billionaire John Malone explained why he believes these two technology companies will dominate the future. He is not dismayed by Netflix’s guidance of up to $8 billion in content spending next year and multi-billion dollar cash burn. In fact he believes the company’s massive investments are essential for its success.

The internet “makes scale even more important in the media business, where scale always was important. It’s all about scale,” Malone said at the Liberty Media annual investor meeting Thursday.

Netflix was “the first wave. And I think Jeff [Bezos] is gonna be the most disruptive. As [his] Death Star moves into striking range of every industry on the planet.”

Some investors have lamented over the sky-high price to earnings multiples for Amazon and Netflix. Hedge fund manager David Einhorn questioned the valuations of the two companies in his letter to clients on Oct. 24.

“Our strategy relies on the assumption that the equity value of a company equals the market’s best assessment of the current and future profits discounted at the company’s cost of capital,” Einhorn wrote.

But investors may want to take a longer term view appraising profit streams in this increasingly disruptive world. Companies’ near terms earnings are of little consequence, if their businesses get crushed by Amazon or Netflix in a few years.

“The only thing one can be certain about is that things will change and companies will be disrupted,” Bernstein consumer analyst Ali Dibadj wrote on Nov. 10.

Disney’s stock price moves following its Nov. 9 fourth quarter results was telling. Initially the shares fell more than 3 percent during the extended hours session after the media giant reported weaker-than-expected earnings versus the Wall Street consensus.

But the company’s shares rallied after it revealed plans to price its upcoming streaming service “substantially below” Netflix on its conference call. Disney shares traded up 2 percent the following day after the report.

Even though the media company missed its earnings, the market rewarded Disney for its aggressive pricing strategy to achieve scale against Netflix.

Wal-Mart and New York Times represent two other examples of old elephants learning how to dance in the new digital age.

Retail stocks have suffered this year due to competitive pressures from Amazon. The SPDR S&P Retail ETF’s declined 8 percent year to date through Thursday, however Wal-Mart shares are up 44 percent.

Analysts have lauded the world’s largest retailer for aggressively investing in its online sales business to compete against Amazon. Wal-Mart acquired e-commerce startup for $3.3 billion in Sept. 2016.

“With a solid foundation in place, Wal-Mart is increasingly playing offense,” Baird analyst Peter Benedict wrote in a note to clients Thursday. It is “becoming a powerful omni-channel force.”

New York Times shares are also up handsomely this year. Its shares are 32 percent through Thursday after three consecutive years of mediocre returns.

Even as the media company’s print ad sales have plummeted this year, down 20 percent in its most recent quarter, the market is boosting New York Times’ stock price for figuring out its digital strategy.

The company’s digital subscription revenue surged 44 percent in the nine month period ending in September.