With park doors shut and its consumer business at an all-time low, Disney’s (NYSE:DIS) streaming service has proven to be an unexpected diamond in the rough this year. The performance of this business segment has done wonders for Disney stock as investors turn increasingly bullish.
In fact, it is so successful that some analysts predict it will be Disney’s biggest segment by 2024. As entertainment trends changed with the pandemic, this statement comes as no surprise.
Streaming movies and TV shows online have become a major (if not the only) source of entertainment for many.
Disney’s platform, Disney+, once a novice in this sector is set to become one of its biggest players. Here’s why this company is a great play right now.
Investor Day Excitement and Disney Stock
In the world of streaming, there’s no company that’s hotter than Disney right now. The entertainment giant’s stock hit an all-time high last week following Investor Day 2020.
At the event, Disney made a slew of new announcements surrounding the future of its streaming service. Although this news included a price hike in its subscription, investors rejoiced at the announcements. Disney stock was up by a record 14% following the event.
There was a lot to unpack at Disney’s Investor Day but here are the highlights. The company currently has 86.8 million subscribers but expects this value to hit a whopping 230 to 260 million by 2024.
The House of Mouse plans to bring in the crowds by introducing lots of new content on its platform. This includes over 100 new movies and TV shows- some franchise winners and new releases. However, the entertainment corp still values “quality over volume” as Disney execs told CNBC.
The amplification of digital content does not mean that this will be Disney’s sole strategy for new releases moving forward. Although theatres continue to remain shut for the foreseeable future, Disney says that the release of its new movies will remain flexible.
Both Mulan and Soul were pulled from a theatre release this year. However, Raya and The Last Dragon will release on Disney+ and in theatres. Other entertainment companies like AT&T’s (NYSE:T) Warner Bros. said that every one of its movies in 2021 will roll out in theatres and on HBO Max at the same time.
Digital streaming has proven to be a huge win for Disney this year and the company plans to cash-in. There is a good chance that movie theatres will lose their allure in a post-pandemic world. Disney+ will serve as the entertainment giant’s ticket to success as we head towards a new normal.
Disney’s Second Act
After struggling to stay afloat (like many businesses) in the first half of 2020, Disney got its groove back with digital streaming.
While 2020 has been for a good year for the company, the House of Mouse is only just getting started. And if Investor Day was any proof, its second act will be even better than the first. The company sees itself moving towards (maybe even surpassing) a Netflix-esque (NASDAQ:NFLX) business model in the near future.
However, the focus on digital content will come at the cost of shifting its licensing away from TV broadcasting channels like Fox and ABC. This is could eventually lead to Disney cut ties with TV networks as it focuses on self-distribution through Disney+.
In addition to this, Disney is only expected to break-even on its services in 2024. This means the current guidance set by the company call fall short if it doesn’t meet its expectations.
Nevertheless, analysts remain increasingly bullish on Disney stock. According to Michael Nathanson, an analyst at MoffetNathanson, the “sheer size and quality of the content tsunami headed towards Disney was mind-blowing.” He increased his price target by $139 to $160. Other experts have mirrored a similar sentiment to Nathanson.
The Bottom Line
With the announcement of new content on Disney+ and rosy growth projections, Disney stock investors have a lot to look forward to.
In its previous quarter, the direct-to-consumer and international business made $4.85 billion in revenue which was up 41% from a year ago. Disney hopes to keep this momentum going in the next year as well.
Disney+ subscribers will see a hike in prices from $6.99 to $7.99 a month but that’s a small price to pay for the avalanche of new shows.
Although Disney stock hit a record peak last week with a 14% rally, there’s still time to get in on this stock. The streaming platform hopes to reach its ambitious goals over the next 3-4 years which will result in some hefty gains. Given the historical success of Disney+, this bullish rally will continue.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
