The Walt Disney Company: Pushing Past Netflix?Dec 14, 2020
Price Target: $170
Target Date: 4/2021
If Disney (DIS) is able to achieve their stated goals, Disney will end 2024 with over 300 million Disney+ streaming subscribers! This would bring the business line to roughly $35B in revenues! If they are able to achieve their goal levels, this would make Disney+ their largest business line by that time. This would mean that Disney had successfully completed a company wide transformation and would therefore allow them to pursue more digital opportunities over time.
Looking further into Disney's projections, it appears that if Disney it able to achieve it's goal of 300-350M subscribers , it could match or surpass Netflix in customers by 2024 (we derived this by projecting out Netflix's customer base by then). Additionally while Disney content strategy includes a push into local international programming (originals and acquisitions), it at this point does not include day-and-date theatrical and streaming releases of its flagship films nor a major shift in US sports rights to ESPN Plus. Finally, Disney also appears to be migrating towards a bundling strategy around its platforms with the potential for a single app approach down the line. This last point has major implications from a competitive standpoint, should they be able to successfully deliver. If so, they'd have a significant advantage to its competitors by rolling in the rest of their product suite, whereas others would not be able to offer as much content at the same price point.
All in all though Disney is accomplishing these customer projection levels through additional content investments, reaching $2-3B incremental expense to our expectations in 2024.
Disney expects to reach profitability on its Disney+ business in 2024, in line with its April 2019 outlook and our expectations. This shows why companies with massive scale, with competent management, can potentially pivot and stop out competition properly.
Given these projections, we are reiterating our overweight thesis on Disney and are also increasing our price target to incorporate these higher than expected projections from Disney's management team.