Wells Fargo Puts Brakes on Disney Stock, Cites Sluggish Content, Streaming Sub Growth

Investment bank Wells Fargo Nov. 22 lowered its Disney share price valuation less than 5% following the media giant’s sluggish streaming video subscriber growth in the most-recent fiscal period.

Wells Fargo analyst Steven Cahall lowered Disney’s share price target to $196 from $203, citing two factors. First was a 2 million Disney+ sub gain, which was less than 50% of company estimates. While the SOVD added 4.4 million gross subs in the quarter, it lost 2.4 million subs in India through its Hotstar subsidiary acquired through the 20th Century Fox deal. India accounts for 37% of all Disney+ subs.

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In addition, Cahall said the pandemic continues to undercut Disney’s ability to generate content. The recent Disney+ Day saw a handful of announcements for new series such as “Agatha: House of Harkness” and “Spider-Man: Freshman Year,” and behind-the-scenes DVD features, among others, delivered via social media instead of official presentation by company executives.

“Our work indicates that the slowing content machine was the culprit, and our cohort analysis of organic core net adds (i.e. Hotstar) supports subs re-accelerating with content amortization increasing,” Cahall wrote in a note.

The analyst believes Disney’s direct-to-consumer business, which topped 179 million subs across Disney+, ESPN+, Hulu and Hulu + Live TV, is valued at $165 billion, including $135 billion for Disney+. That’s about $150 billion less in valuation than rival Netflix — which added 4.4 million subs in its fiscal quarter.

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