As Covid-19 decimates theme parks, sports, production and other pillars of its business, Walt Disney Co. is expected to limp towards the end of 2020.
Instead, investors have largely bought into the media giant’s resilience, pushing the company’s shares up more than 25% last month. The shares ended today at $ 154.40, their highest ever closing price, after peaking at $ 157.45 earlier today.
The balance sheet may be in tatters (with two consecutive quarters of losses and the first year in red ink in 40 years) but the stock fuels the dream of a return to glory. To quote the 1964 theme song from the last DisneyWorld TV commercials, “There is a great great beautiful tomorrow. ”
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Vaccine approvals and the prospect of more normal business dynamics (and life in general) in 2021 have boosted confidence, but optimism has more to do with the company’s investor presentation on Thursday. In an epic four-hour event, Disney will tackle a range of business lines, but will primarily outline its streaming plans. Details are kept close to the vest, and the management team has been sequestered for days of rehearsals and pre-recordings. But expect plenty of announcements of new film and series projects from Marvel, Lucasfilm, Pixar, and other corners of the kingdom. There will also likely be potential changes related to movie release windows, new premium streaming levels, subscriber screenings, international programming, and sports.
Aftershocks continue to be felt following WarnerMedia’s call last week to send all 2021 Warner Bros. movies to stream on HBO Max as they open in theaters. With a massive comeback from the talent community and funding partners hitting Warner, Disney could earn points on Thursday even if it just designates theaters as a key location (which they are). The company has minted money in theaters and controls over 40% of the US box office. With theaters closed, especially in major markets like New York and Los Angeles, the company has rerouted Hamilton, Mulan and Soul to Disney + in 2020 and, as Deadline reported, will likely do so with versions like Cruella, Pinocchio and Peter Pan.
While the Premier Access fee of $ 30 to subscribers for Mulan was widely viewed as aggressive, CEO Bob Chapek indicated that the company could continue with the model, perhaps at a different price. Conceptually, this sounds like the first electronic sales window Chapek helped develop when he oversaw Disney’s home entertainment operations in a previous chapter of the company’s leadership.
Morgan Stanley’s Ben Swinburne has said he expects the company to ’embrace’ and ‘take advantage’ of Disney + more and more and that his streaming release plan ‘likely incorporates an ongoing Premier Access model’ . The day and date release in theaters and on Disney + “would be optimal for Disney and consumers,” he wrote in a note to customers.
One of the things that could save time on the stage is the dramatic reorganization of the company earlier this fall, with Kareem Daniel being appointed to a key executive role overseeing a single central distribution group. A single P&L for projects is the result, but there have been questions about how the old protocols will transition to the new. The theme park sector – which hardly needed any further promotion in April 2019, the last time Disney hosted an investor day – will likely receive more than love at first sight. While Disneyland is expected to remain closed until 2021, other parks have been opened.
After the last day of Disney investors in 2019, the stock rose 10% the next day. Then-CEO Bob Iger unveiled a bold crowning of his series of deals for BAMTech, Hulu, and most of 21st Century Fox, projecting between 60 and 90 million Disney + subscribers over his five first years. Pulling gasps into a soundstage on the company’s main lot in Burbank, the company hit the ground running by revealing the price of Disney +: $ 7 per month. That’s less than half of what WarnerMedia charges for HBO Max or the most popular Netflix subscription plan.
Partly because of the prices, Disney + racked up 73.7 million subscribers worldwide in early November. Alan Gould, an analyst at Loop Capital, predicts the company will double its forecast for subscribers to 120 million to 180 million by fiscal 2025. The company’s spending will also rise, especially with theaters closing, he predicts. and other analysts. Gould estimates that the budget for streaming originals will reach $ 7 billion per year by 2025, up from $ 2 billion initially.
A number of price target upward revisions and a key upgrade crossed the backboard on Wednesday. Gould, who rates Disney stock as a “buy,” raised his 12-month price target on his stock to $ 175 from $ 150. Morgan Stanley’s Ben Swinburne reaffirmed his “overweight” rating and raised his goal from $ 160 to $ 175.
Steven Cahall of Wells Fargo changed Disney stocks from “overweight” to “neutral,” writing in a note to customers that Disney is “on the verge of completing its transformation into a global streaming content company.”
KeyBanc also launched an “overweight” Disney hedge, with a price target of $ 177.
ESPN, even more than the film studio, is the subject of heated debate among investors. Some on Wall Street predict that ESPN could be completely divorced from pay TV. With 10.3 million subscribers, ESPN + has exceeded expectations but is not a firmly established staple for sports fans. Still, many variables remain, including the massive discussions about renewing the NFL and the NBA.
Michael Nathanson with MoffettNathanson doesn’t expect a dramatic move on ESPN Thursday. “Given that there are still 80 million paying households in a live sports-based package, why would Disney risk cannibalizing this revenue stream to find new sports customers residing in the 30 million home universes?” broadband only? ” he asked in a recent note to customers. “We can see ESPN + adding new niche sports like the NHL (while a new rights deal is being negotiated) like it did with the PGA, but we don’t think Disney will use the day. investors to explode the ecosystem. ”