Disney Stock Rises After Wall Street Analyst Boosts Streaming Outlook

UPDATED with closing price. Disney stock rose 4.4% Thursday, setting a record high closing price of $141.74, after a Wall Street analyst boosted his price target for the company on increased optimism about the company’s streaming prospects.

Benjamin Swinburne of Morgan Stanley, in a note to clients, said he is now forecasting that Disney will reach more than 130 million global subscribers by 2024 across its three streaming services, Disney+, ESPN+ and Hulu. The analyst sees Disney+, which launches in November, accounting for 70 million of the total, which is within the range of 60 million to 90 million that Disney has projected.

Last month, Disney said it was taking full operational control of Hulu and buying out minority stakeholder Comcast in a multi-year arrangement. The company has talked about bundling together the three services but has not yet disclosed any of those bundle details.

“Our willingness to underwrite these higher DTC estimates stems from 1) a faster-than-expected global launch, 2) more IP aggregated more quickly than anticipated, and 3) a plan to leverage third-party distribution,” Swinburne wrote.

He increased his 12-month price target for Disney stock to $160 from $135 and maintains an “overweight,” or “buy” rating on the shares. Investors have kept shares aloft since the company revealed details of its streaming strategy in April. On an intraday basis, the stock’s 52-week high of $142.37 was established on April 29.

Netflix stock closed down a fraction Thursday at $343.43. Since Disney’s investor day on April 11, when the company won raves for its extensive and substantive tour of its streaming plans, Netflix stock has lost 7% of its value.

Swinburne sees Disney’s velocity as greater than Netflix’s in terms of penetration. With 149 million global subscribers, Netflix is in between 25% and 30% of broadband households, but Disney will benefit from more established infrastructure, the analyst said.

“Why we believe Disney Plus ramps faster than Netflix: 1) The OTT market is much more developed today than 12-13 years ago, and 2) Disney brings known brands and IP to the marketplace,” he wrote.

By the end of 2020, Swinburne expects Disney+, ESPN+ and Hulu to combine for more than 50 million subscribers.

One potentially bearish scenario raised by Swinburne is the cost of competing in the high-stakes streaming game, especially given the revenue Disney has agreed to forfeit from licensing film and TV titles to Netflix.