Disney's Planned Streaming Product Gets Wall Street Vote of Confidence
"We believe the company has the key mix of assets to be successful and the opportunity from this pivot could be substantial," wrote a Barclays analyst.
Disney's in-the-works streaming service earned a vote of confidence Friday on Wall Street, with an analyst upgrading the stock prior to the opening bell and shares rising three percent by the close of trading.
"We believe the company has the key mix of assets to be successful and the opportunity from this pivot could be substantial," Barclays analyst Kannan Venkateshwar wrote in his upgrade note.
The analyst raised his target price on shares to $130 from $105 previously. The stock closed at $118.90, suggesting that Venkateshwar figures it will rise nearly 10 percent over the next 12 months — good enough to rate it "overweight" in Barclays ranking system.
Disney won't be launching its service until next year, but it is already gradually removing content from Netflix in order to populate the yet-to-be-named product.
Alongside Disney, Pixar, Marvel and Lucasfilm content will be some of what it acquires from 21st Century Fox when its $71 billion partial merger closes, also next year.
Some are already calling Disney's streamer a "Netflix killer." While that is clearly hyperbole given the leader in the category has more than 130 million worldwide subscribers, what cannot be denied is that much more competition is headed Netflix's way.
There's already Hulu, Amazon, CBS All Access and HBO Now. Meanwhile, AT&T's WarnerMedia is working on a streamer of its own that will presumably contain some high-value movies and TV shows from the worlds of Harry Potter and DC Comics, as well as far more from its rich history as one of the most prolific studios in Hollywood.
It will be expensive to compete with Netflix, which spends billions each year to create new content and license from others, but Venkateshwar notes that Disney is particularly well-suited to the task because it has less debt than its major competitors have.