Lately, Disney (NYSE:DIS) stock has come under some pressure. In the past three months, Disney stock has dropped about 8.5%.
JP Morgan analyst Alexia Quadrani recently published a not-so-flattering report on DIS stock. She lowered her fourth-quarter earnings per share estimate for DIS from $1.05 to 95 cents.
Quadrani has several concerns about Disney stock. First of all, she thinks that DIS will continue to have problems integrating the assets it acquired from Fox Corporation (NASDAQ:FOXA). Next, Quadrani believes that DIS will have to spend a meaningful amount on its streaming platform, Disney+.
While these are legitimate worries, I still think the bull case on Disney stock is very much in play right now. The main catalyst for DIS is Disney+. It will not only generate lots of buzz, but has the potential to transform the company.
But the good news for Disney stock is that Disney+ should be able to distinguish itself from the competition. After all, its offering will have a great deal of outstanding premium content.
One key to Disney+ will actually be Fox’s assets, which includes a rich library of content (among the titles Disney acquired are Avatar, X-Men, Ice Age, and Rio). But of course, over the years, Disney CEO Robert Iger has skillfully acquired and integrated marque assets like Marvel, Pixar and Lucasfilm. All in all, it would be extremely difficult for any rival to match the variety and strength of Disney’s content.
Data And Disney Stock
Data is often overlooked. But it is likely to wind up being the most powerful part of Disney+.NFLX has very successfully used analytics and AI (artificial intelligence) to developing engaging content. But for Disney, digital insights could go beyond that, providing synergies across other parts of its business like merchandising and e-commerce.
What’s more, Disney has a long history of innovation, as it pioneered technologies like audio-animatronics, monorails and cutting-edge automation systems for its films. But the company has also been investing heavily in AI, focusing on areas like machine learning, Augmented Reality and Virtual Reality and robotics. Data from Disney+ will give the company new insights and the ability to develop new services.
Synergy and Distribution
The monthly subscription for Disney+ will start at an affordable $7, which compares to Netflix’s (NASDAQ:NFLX) basic plan of $9 per month. Disney+’s low cost should enable it to quickly gain market share.
Disney also benefits from its many distribution points, such as parks, websites, cable networks and so on. The company is also working hard on forming partnerships. Just look at its recent deal with Verizon (NYSE:VZ).
Under the deal, Verizon will provide free access to Disney+ for one year to all of its customers who subscribe to unlimited wireless, Fios and 5G Home Internet offerings.
Disney is projecting that its streaming service will have 25 million U.S. subscribers and 50 million international subscribers by 2024. Yet that forecast seems overly conservative. In light of the service’s low price point and compelling premium content, it seems like Disney+ will attract many more subscribers.
InvestorPlace columnist Luke Lango estimates that if every household that watches a Disney movie at least once a year subscribes to Disney+, the service will have 180 million subscribers.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.