December 10, 2020
With the Walt Disney Co. set to hold a virtual Investor Day today (Dec. 10) after the market close, Wall Street has already popped Champagne bottles in anticipation of positive news on the company’s streaming video initiatives and vaccine-related impact on parks and amusement business.
Disney shares closed Dec. 9 at a record high following multiple analyst reports projecting CEO Bob Chapek will deliver exciting news this afternoon regarding the company’s first PVOD release Mulan, another season of “The Mandalorian,” and possible transition of new “Star Wars” content from the big screen to streaming.
On the Disney’s last fiscal call (Nov. 12) Chapek said the Disney+ streaming service had topped 73 million subscribers — well ahead of company projections.
“Chuck the [dividend], torch [earns per share], spend aggressively, All Systems Go on streaming,” Steven Cahall, analyst with Wells Fargo, wrote in a note. “In other words, we think investors will soon be willing to pay a high multiple for a global streaming growth story. So, if one is excited about the sub growth story then the stock price should take care of itself, in our view.”
In the movie business, Disney’s Soul is set to go head-to-head with Warner Bros.’ Wonder Woman 1984 as the big Christmas Day digital debuts. Disney moved Soul from a November theatrical release to stream exclusively on Disney+, while Wonder Woman 1984 will be available on HBO Max and in theaters simultaneously.
“It seems now would be the perfect time for continued experimentation — a free pass to determine the right future distribution strategy for Disney’s ‘theatrical’ content,” Rich Greenfield with Lightshed Partners wrote in a note last month.
Greenfield argues that if streaming is Disney’s top priority, why is major TV content such as “The Bachelorette” and “Dancing With the Stars” not premiering on Disney+ or Hulu, with delayed airings on linear TV?
“Why should any compelling TV or film content that can be shifted to streaming first, not be shifted to streaming first?,” Greenfield wrote.
Morgan Stanley analyst Benjamin Swinburne expects Disney+ to end Fiscal Year 2025 with 145 million paid subscribers with revenue of nearly $11 billion in FY25. The analyst believes that combined with Hulu, ESPN+ and Star, Disney could see 250 million total streaming subs by 2025 generating more than $33 billion in revenue.
“Fiscal 2020 [direct-to-consumer segment] losses came in at $3.3 billion, below the original implied guidance for $3.5 billion to $4 billion by our estimates, with much stronger customer growth partially offset by Disney leaning in on marketing,” Swinburne wrote. “For fiscal 2021, we increase our estimate of DTC losses to $4 billion to $4.5 billion and forecast profitability on DTC in 2024.”
Disney shares remain up in midmorning trading at $154.55 per share.