Disney's streaming launch shows strong demand and more profit for its stock

After three months of underperformance, the shares of Walt Disney Company (NYSE 🙂 are flirting again with a record high. The last momentum is supported by the enthusiasm of investors that the exit of the media company in the streaming business will be a great success.

And there is little reason to doubt investor confidence. The new video streaming platform attracted 10 million customers after the Disney + service debut last Tuesday in the US and Canada. That astonishing number of surprised analysts, who had expected Disney to take much longer to reach that level.

To put that number in their context, the HBO Now took about four years to reach about 10 million streaming subscribers. As we emphasized in our earlier articles, Disney has everything it takes to build a competitive streaming video product to challenge its rivals, including the established Netflix Inc (NASDAQ :).

Disney owns many successful content franchises that rival its rivals. Star Wars and Marvel for example – as well as the large catalog with children's classics, from & # 39; Cinderella & # 39; to & # 39; Aladdin & # 39; until & # 39; Moana & # 39 ;, will make its streaming service a formidable player in a market that will soon be very busy.

The company adds depth to its service by quickly signing agreements with technical giants, along with a promotional link with Verizon Communications Inc (NYSE :). Chief Executive Officer Bob Iger said last month that Disney + will roll out in Western Europe in early March, rather than many thought.

Disney surprised the media world with a low price for its Disney + streaming service, which is nearly half of the most popular $ 12.99 monthly subscription from Netflix. According to a recent poll by The Wall Street Journal and the Harris Poll, where roughly 2,000 adults were surveyed to gauge market sentiment about streaming services, about 47% of respondents said they would probably subscribe to Disney +.

Streaming Wars

With early signs of an overwhelming response to the successful launch of Disney & # 39; s streaming service, analysts are rapidly changing their minds about the company, which should check if costs are out of control and to integrate Time Warner assets who acquired it last year.

From here, "Disney + should take the lead in determining stock trajectory," said Bernie McTernan, an analyst at Rosenblatt Securities, in a recent note. He said the launch is likely to be positive for Disney shares, with a price target of $ 170. The shares closed at $ 147.15 yesterday.

Disney's weekly price chart

MoffettNathanson analyst Michael Nathanson also had a & # 39; buy & # 39; rating on the shares with the target price of $ 150 per share.

"We may underestimate the size of the first year of launch," he said in a recent note. "The market feels great things are brewing in the coming quarters," and momentum in subscriber growth may become the "only focus" for investors.

Sanford C. Bernstein analyst Todd Juenger predicted that Disney + could have 20 million subscribers in the first year.

In response to this applause, Disney shares reached a record high of $ 150.63 after an increase of around 14% in the last two weeks. Their upward movement is also supported by the quarter that ended on September 30, showing that the company's other assets will continue to lend a helping hand as streaming wars intensify.

Apple Inc.

(NASDAQ 🙂 has already launched its streaming service, while the largest US telecom operator, AT&T Inc (NYSE :), is preparing its product for the launch of May 2020

Earlier this month, Disney reported better-than-expected fourth-quarter results, encouraged by the company's film studio and theme parks and consumer products division. Fourth quarter earnings were lower than a year earlier and were $ 1.07 per share, surpassing the $ 0.95 average of analyst estimates. Sales increased 34% to $ 19.1 billion as a result of the acquisition of 21st Century Fox assets of $ 71 billion, which was closed in March.

Bottom Line

If you have to choose a winner in this simmering flowing battle, Disney is a solid candidate to bet on. It has huge content that other players lack and probably need years to build. Moreover, it has other companies to offer cash flows, while the costs escalate to execute this huge project. For these reasons, we recommend buying Disney shares, which we believe are well positioned to capture Netflix's market share.

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