Disney Streaming Service Poised For Quick Ramp, Says Bullish Morgan Stanley
Streaming is where entertainment is going, and it's getting there faster than some expected with the new Disney+ service, Morgan Stanley said Thursday.
Disney+ is bringing in subscribers, Swinburne said in a note. (See his track record here.)
Morgan Stanley expects the service to trend toward 13 million subscribers at the end of 2020. When combined with Disney’s other OTT brands, ESPN+ and Hulu, this translates to a subscriber base of more than 50 million for Disney, the analyst said.
Swinburne said he expects Disney+ to have a faster path to success than earlier services such as Netflix, Inc. (NASDAQ:NFLX), as the OTT market is much more developed now than when Netflix started — and because Disney has a stable of known brands it brings to viewers.
Morgan Stanley sees 30% long-term margins for Disney+, and the analyst said concerns about cannibalizing legacy business are overblown; streaming is the future, and that’s where the success will be, he said.
“We believe the market has often overstated the risk and underappreciated the reward of the transition to streaming."
The risks include the following, Swinburne said:
- Disney isn’t a tech company and has little direct-to-consumer history.
- Macroeconomic weakness could be a hit to Disney’s parks segment.
- Content matters. “Any fade in popularity of key franchises at Marvel, Star Wars, Pixar,and Disney would likely pressure both earnings and the multiple,” the analyst said.
Disney shares were up 2.38% at $138.95 at the time of publication Thursday.
Photo courtesy of Disney.
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