Disney Stock Soars After Launching Disney+
This week Disney launched its much-anticipated streaming service called Disney+. This new revenue source for Disney is designed to compete with the other streaming services such as Netflix and Apple TV+. However, Disney has a stronger competitive advantage than their close rivals in this space.
It was expected that Disney+ would sign up between 60-90 million subscribers by the end of 2024. That means in the best-case scenario, analysts were projecting 18 million subscribers by the end of next year. However, in just the first day of the launch, Disney reported that 10 million people had signed up already. That’s 55% of their 2020 best case scenario—all in only its first day. This great news sent the stock soaring over 7% on Wednesday. On the other hand, Netflix shares closed down 3.1%.
Many wall street analysts had discounted Disney stock stating that it was overvalued and poised for a big pull back. Nevertheless, the Surevest Investment Committee was bullish the stock siting the strong ecosystem Disney had created to capitalize consumers on many fronts. Disney has four revenue segments (Media Networks, Studio Entertainment, Parks, Experiences & Products, and Direct-to-Consumer & International), each of these segments is strong on its own, but what makes this ecosystem so valuable is that each revenue source can strengthen the other.
For example, when Disney released the blockbuster movie Coco in 2017, it made a lot of money in the box office ($807M), Coco characters were introduced in Disney parks, which helped drive demand in that segment. In turn, these characters became more popular, which increased product sales. Now, with the new streaming service, Coco will be available to watch on Disney+ and will help drive more subscribers. Another great example is Star Wars—it benefits from the same ecosystem as the Coco. This translates to strong revenue growth for Disney and good returns for its shareholders.
Robert Luna, Surevest CEO & Chief Investment Strategist, has understood Disney’s competitive advantage for a very long time. Even when analysts were skeptical, Robert made a clear case why this stock still had room to grow. He has been on national media countless times discussing Disney; a couple of our favorite media clips include the November 2014 appearance, “A lot to be excited about at Disney” and “Don’t underestimate Disney” from December 2015.
There is still a lot to be excited about for this stock and we expect it to continue to be a winner over the next few years.