Disney soars on new streaming service reveal—Jim Cramer, experts react

Investing


The magic of Disney might be back.

Shares of the entertainment giant surged to a record high on Friday after Disney revealed details tied to its highly anticipated streaming service, Disney+, at an investor conference Thursday night. The service, which will be available starting in mid-November at $6.99 a month or $69 a year, pits the company against the likes of Netflix.

Bob Iger, Disney’s chairman and CEO, told CNBC after the announcement that he was “optimistic” about Disney+ “because of the content we’re putting on, because of the user interface and because of the price.”

Here’s what Wall Street thinks the move will bring:

Jim Cramer, host of CNBC’s “Mad Money,” said the streaming push would work in Disney’s favor:

“How can you not take it? It’s a reasonable price. You have an unbelievable library. We have all bought these. … I’ve bought every single property of Disney. [For] my kids, it just was kind of a rite of passage. Now, the other thing is … specificity mattered more than numbers. They did say that next year’s going to be tough. Do you know that I’ve seen numbers out 2023 — Bob Iger’s contract ends before that — 2024 that are using $9, $10? I have never seen a company other than, perhaps, yes, Netflix and Amazon, where we were looking out four, five years and buying a stock. He has transformed this company back to a growth stock in a way that people are saying, ‘Finally, I’ve got one with earnings, with a balance sheet, with a great CEO; I don’t have to risk it anymore.’ That’s what this story is. Specificity and the out-years. Wow. Wow. Big.”

WinView Executive Chairman Tom Rogers was also optimistic but questioned how the move might affect Disney’s other streaming play:

“I think they did a terrific job on Disney+. Look, you’ve got kids’ networks declining 20% year over year, and it’s been going on for a while, so they’ve got to do something when it comes to kids and family. My question’s really related to ESPN+ and Hulu, where the big underreported story has been the parent company of this network and AT&T owning 40% of Hulu, and what did that mean? And it looked like it meant that there [were] enough governance rights that those companies had that Hulu as a global play was in question, meaning they would have to agree to it, and there are all kinds of questions as to whether they would.”

Laura Martin, a senior analyst at Needham & Co. covering Disney, worried that Disney’s targets might be too bullish:

“They are very aggressive on the kind of [subscriber] growth they could achieve, saying that they could hit 60 to 90 million subscribers in five years for a service they haven’t launched yet, for Disney+, plus another 10 million for ESPN+, which has 2 million subs today, plus Hulu at 40 to 60 million subs. So if you add it all together, they’re saying that 70 million households will pay Disney for a consumer service by 2024, and that’s about 50% of households by that date, which is what Netflix has today after having a monopoly in streaming for the last five years. So I think those are pretty aggressive numbers for Disney to come out with.”

Disclosure: Cramer’s charitable trust owns shares of Disney.



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