Heigh-ho, Heigh-ho, off to stream we go.
Disney’s (DIS) new streaming service, Disney+, launched on November 12, with fireworks going off and stardust being sprinkled across the network. With 10 million sign ups in less than 48 hours, Disney shares reached a new all-time-high the following day.
The numbers immediately establish Disney as among the leaders in the streaming industry. With Disney owned Hulu’s 26.8 million subscribers and ESPN’s 3.5 million, Disney has over 40 million viewers. Industry leader Netflix, by comparison, has 60 million.
The move into streaming seems to be a shrewd one from the family entertainment colossus, as not only does the service offer subscribers content from its rich history plus original programming and live TV, it offers a further avenue to attract new customers into the Disney universe of theme parks and products. Disney’s entrance onto the streaming battlefield will be a tough one to compete with, as the media giant’s multi-channel revenue stream is one few companies can match.
Rosenblatt Securities’ Bernie McTernan was taken by surprise by the impact of the launch, noting, “We are raising our Disney+ estimates considerably, now assuming 21M global subscribers at the end of December and 35M at the end of fiscal '20E.”
As a result, Ternan reiterated a Buy rating on DIS, while slightly increasing his price target from $170 to $175. This implies another record high is on the cards, and a potential upside of 20% from the recent share price of $146.83. (To watch McTernan’s track record, click here)
McTernan commneted, “Following a faster than expected start to Disney+ and a bullish tone in our second streaming video survey, we are significantly raising our Disney+ estimates. By the end of the December quarter we expect Disney+ to have 21M subscribers, broken down by 18M domestically and 3M internationally. For FY'20E, we now expect 35M global subscribers at the end of the year, relative to 10M prior and a likely slower to adjust consensus at 16M. We now assume Disney enters the 60M to 90M guidance range during FY'22E, two years early and ends FY'24E at nearly 100M global subscribers.”
McTernan further noted that with the holidays around the corner, international rollout of Disney+ coming up over the next few months, and the Marvel original series to be added in the fall of 2020 as factors set to drive more subscriptions.
Overall, Wall Street analysts tend to side with McTernan's bullish perspective on the entertainment giant's stock. Out of 17 analysts tracked in the past 3 months, 13 are bullish, while 4 remain sidelined. Yet, a lot of the optimism is already baked into these analysts' expectations. The 12-month average price target of $154.87 boasts potential upside of just 5% and a change from current levels. (See DIS stock analysis on TipRanks)
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