Disney's streaming service growth and strategic pricing could potentially double the stock value

From Nasdaq: 2024-12-02 01:04:13

Disney’s streaming business is gaining traction, with revenues growing to $23 billion in FY’24, nearing Netflix’s $39 billion. Despite Netflix’s stock surge, Disney’s streaming services have over 175 million subscribers and are becoming more profitable. Disney’s streaming business could double its stock value with revenue growth and increased operating margins.

Disney’s direct-to-consumer segment saw a 15% revenue increase to $5.8 billion last quarter, with operating profits reaching $321 million. Disney+ added 4.4 million core subscribers, totaling 123 million, while Hulu had 52 million. Disney’s strategy of raising prices and promoting ad-supported plans is driving revenue growth and profitability.

Netflix remains ahead with 283 million subscribers globally, compared to Disney’s 175 million. Netflix’s ARPU is higher at $11.60 versus Disney’s $7.30, but Disney’s Hulu service has higher monthly revenues. Disney’s vast intellectual property library, including Marvel and Star Wars, could fuel growth. Disney aims to boost streaming margins and subscriber additions to bridge the valuation gap with Netflix. Disney continues to benefit from its paid-sharing model and diverse offerings like Disney+, Hulu, and ESPN+. Lower marketing costs and bundled deals help retain customers. With a value chain including theatrical business and theme parks, Disney’s content investments are expected to be more durable than Netflix’s. Stock valued at $130 per share.

In terms of returns, Disney has seen a 22% monthly return, 31% year-to-date return, and 19% total return from 2017-2024. Comparatively, the S&P 500 had a 5% monthly return, 26% year-to-date return, and 168% total return. Trefis Reinforced Value Portfolio had an 8% monthly return, 24% year-to-date return, and 822% total return.

For those interested in investing, Trefis offers market-beating portfolios and price estimates. It’s important to note that the views expressed in the article are those of the author and not necessarily those of Nasdaq, Inc.



Read more at Nasdaq: How Disney Stock Can Double