UPDATED with closing price. With Wall Street analysts lining up to praise Disney for its thorough presentation of its long-awaited streaming offering, Disney+, investors sent shares up more than 11% to an all-time high of $130.06 in Friday trading.
On Thursday afternoon in Burbank, CEO Bob Iger and a dozen senior executives put on a three-hour show for investors, showing off the content and game plan for Disney+. The streaming service will go live on November 12, at a comparatively cheap price of $7 a month, or $70 a year.
The bar is high for Disney given not only Netflix’s 140 million global subscribers but also the $71.3 billion price tag for the company’s Fox acquisition, which is premised on fueling the company’s streaming ambitions. While optimism was running high ahead of the investor day, the company managed to deliver an upside surprise with a presentation that offered a wealth of substance and compelling detail, a stark contrast with Apple’s similar event last month.
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“Truth be told, most investor days don’t live up to the hype and this one had the potential to be disappointing,” Michael Nathanson of MoffettNathanson wrote in a note titled “Worth the Wait” that he circulated Friday morning. “Disney had set a high bar of expectations and rose to the challenge. Surprisingly, the company shared a tremendous amount of DTC financial metrics including subscriber and profit guidance.”
In addition to the financials and “very impressive slate of new content and catalog titles,” he added, “the disclosure of the low price point generated a collective gasp in the room. The service, which also will include The Simpsons and an incredible slate of new Pay 1 movies, looks like a bargain compared to other entertainment options.”
Todd Juenger of Sanford Bernstein also came away impressed after attending the event. “Management used the word ‘aggressive’ multiple times,” he wrote. “That certainly looks to be true for the next year (or few).” The only skeptical note he sounded pertained to Hulu, whose international expansion could require “significant” investment that may prove a drag on future earnings.
Still, the plan to scale Disney+ and package it with Hulu (of which Disney now owns 60%) and ESPN+ drew universal raves from the Street.
“We believe Disney+ is positioned to see very fast early adoption due to its extremely low price, compelling content, and strong brand recognition,” wrote Cowen & Co.’s Doug Creutz, who recently upgraded his rating on Disney stock to outperform. “With management having put a stake in the ground for its DTC initiatives, we think this will likely set the stage for improving sentiment.”
Netflix will report its first-quarter earnings on Monday. In anticipation, Guggenheim analyst Michael Morris issued a research note reiterating his “buy” rating on the stock. “The Netflix consumer offering is a substantial customer value in both price and utility,” he wrote. “The company’s efficient model will continue to support the virtuous cycle of quality content delivery and monetization. Though major OTT launches will occur over 2019-20, we maintain our view that Netflix holds a firm financial and competitive position over the next several years.”
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