Shares of Walt Disney (DIS) took off like a rocket last Friday as the company announced at its latest Investor Day that it had already met its 2024 total subscriber targets for its steaming platforms, observes value investing expert Jason Clark, contributing editor to The Prudent Speculator.
The film, entertainment and theme park powerhouse now boasts 86.8 million subscribers to its flagship product Disney+ worldwide and now expects between 300 million to 350 million total across Disney+, Hulu and ESPN+.
Such growth would put its subscriber totals in the ballpark of streaming competitor Netflix, whose rise in customer totals has slowed in recent quarters as it approached 200 million globally.
Management says it plans to reinvest incremental revenue generated from subscriber growth back into content and expects to achieve profitability by fiscal 2024.
Disney also plans to raise the price of Disney+ in March. CFO Christine Mary McCarthy elaborated, “We clearly have an incredible opportunity to build a substantial global subscriber base. But we also believe we have the opportunity to increase Disney+ pricing given the additional value we will be adding to the service."
McCarthy continued, "So in March of 2021, we will be increasing the U.S. price of Disney+ by $1 to $7.99 per month…These price increases reflect an increase in the underlying value of the Disney+ product offering as well as the inclusion of Star general entertainment content in many markets.”
We appreciate how much control this gives the company over distribution of its intellectual property and applaud management for doubling down on its streaming services.
Another critical spoke in Disney’s flywheel, we expect a COVID-19 vaccine to spring the theme park business back into action in 2021 after having been virtually on pause for much of the current year. The 13.6% spike to close out last week drove year-to-date share performance to 21.5%.
And while the stock isn’t as inexpensive as it was a quarter ago, we know how the market has fallen in love with Netflix. Our Target Price for Disney has been bumped to $190.