The stock closed the day at $134.20 after earlier in the trading session flirting with its highest closing price in more than six months. Shares have poked above $135 a couple of times in recent weeks after mounting a comeback from a COVID-19 meltdown in February and March. The Nasdaq, S&P 500 and Dow Jones Industrial Average all fell between 2% and 4% on Tuesday, putting Disney’s upswing in starker relief.
“Disney is succeeding in the land-grab phase of direct-to-consumer,” Deutsche Bank analyst Bryan Kraft wrote in a note to clients. It “has the most clear path to successfully transitioning its general entertainment programming and content production businesses into a globally scaled, vertically integrated streaming entertainment leader.”
Kraft upped his rating on the media company’s shares to “buy” from “hold” and raised his 12-month price target to $163 from $128.
While movie theaters, sports and theme parks — all cornerstones for Disney — are in a fragile early stage of recovery, streaming has been a bright spot for the company. Last Friday, Mulan was released as a “premier access” title, available for $30 to the 60 million-plus global subscribers to Disney+. Across Hulu, ESPN+ and Disney+, the company has surpassed 100 million total subscribers.
Disney has not shared any viewership insights on Mulan as of yet. Sensor Tower and Apptopia, two app analytics firms, released figures showing a boost in Disney+ downloads from Mulan. (The major caveat is that they only measure mobile platforms, not smart TVs, so they miss a large swath of the audience.) Regardless of how many new subscribers came in, the profitability motive is clear. Unlike a typical PVOD release, where third parties take a sizable cut of each transaction, Disney owns the vast majority of Mulan dollars, apart from a slice going to in-app payment parters Roku, Apple, Amazon and Google.
Kraft said Disney has made several moves to position itself for the overall shift to streaming, Kraft wrote. Key advantages include “(a) higher pricing, (b) leveraging the Disney+ base to distribute the soon-to-be-launched Star branded streaming service, and (c) an inevitable shattering of today’s exclusive theatrical window,” the analyst said. The disruption in theatrical, he explained, will “make room for new premium video-on-demand windows that enhance monetization of film studio output and add consumer utility to the Disney+ service.”
The “clearest sign” of a true strategic adjustment, Kraft maintained, is the company’s decision to shutter some traditional pay-TV networks in international markets, including the UK. The willingness to pull those plugs, he wrote, is a “sign of confidence that direct-to-consumer will more than offset lost network revenue.”
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