December 20, 2021
Netflix is ending 2021 the way it started the year: No. 1 across all industry metrics. But Disney, spurred by a strong content pipeline and burgeoning subscription streaming video service (Disney+), is rapidly bridging the divide, according to Bank of America analyst Jessica Reif Ehrlich.
In a new note, Ehrlich contends Disney will end 2021 (and Disney’s fiscal first quarter) on a bullish run, adding seven million Disney+ subs. That’s a bold projection considering the service added just 2 million subs in Q4.
Driving that sub growth is consumer interest in new original series such as “The Beatles: Get Back,” “Hawkeye” and “The Book of Boba Fett,” among others. More importantly, Reif Ehrlich contends Disney’s underperforming December box office could lead the company to “re-evaluate” its theatrical distribution strategy.
Indeed, Disney currently fields just two titles in the top 20 releases in the month, with animated musical Encanto generating $45.2 million in ticket sales since its Thanksgiving debut, and superhero movie Eternals adding $11 million.
Reif Ehrlich said she wouldn’t be surprised to see Disney push content output beyond its traditional brands, such as Marvel, Star Wars, Pixar and Disney, to broaden the service’s reach and appeal.
In his last Wall Street confab appearance for 2021, Disney CEO Bob Chapek said he remained committed to a strategy releasing movies based on current market conditions and streaming — including limiting theatrical releases to 45 days and distributing more titles exclusively on Premier Access and Disney+.
“We will always do what we believe is in the best interest of the film and the best interests of our constituents,” Chapek said.
That’s music to the ears of Reif Ehrlich and KeyBanc analyst Brandon Nispel, who both believe Disney shares are undervalued from 30% to 40%.
“At current levels, investors significantly under-appreciate Disney’s growth potential,” Nispel wrote in a Dec. 13 note.
That logic could apply to Netflix, Amazon and WarnerMedia, according to Wells Fargo analyst Steven Cahall, who believes the trio, along with Disney, control 80% of the streaming video market.
“The last few years have seen the ubiquitous launch of the ‘+,’ and more recently, we think investors have grown far more suspect whether streaming can create value,” Cahall wrote. “Pretty much every media company is now a streaming company, too. But should they be?”