Walt Disney Co DIS said last week its new streaming video service Disney+ has 50 million subscribers, but this is no reason for investors to celebrate, according to Strategic Wealth Partners Mark Tepper.
Streaming Unprofitable Business
Disney's management previously guided for 60-90 million subscribers by 2024 so announcing 50 million subscribers in 2020 certainly puts the company "way ahead" of schedule, Tepper said on CNBC. However, the streaming unit accounts for less than 10% of its total business and remains unprofitable.
Meanwhile, Disney has to navigate through some "serious headwinds" as 40% of its business is derived from parks. The unit will likely remain under pressure for longer than many assume and attendance will be low until the coronavirus is resolved with a cure or vaccine.
"Do you really want your kids touching a ride that 100 other kids touched that day?" Tepper asked. "Probably not. So I'm concerned the attendance at parks might be weak for another year or so."
Media and studio make up another 40% of Disney's business and it's unclear if consumers will return to theaters in three or six months, he said.
Buy Netflix Instead
Tepper said he was a seller of Disney's stock under the assumption it can be re-bought at a lower level. Instead, Netflix Inc NFLX offers investors a pure-play on streaming video.
Netflix boasts a major advantage over Disney in its original content that is binge-watching friendly. By comparison, Disney's platform is full of "a bunch of reruns and old movies and stuff like that," Tepper said.
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