Disney's Streaming App Pricing Will Cost 'Significantly Less Than Netflix'

In conjunction with Walt Disney Co DIS's fourth-quarter earnings report, the company provided an initial glimpse into its streaming service plan. A new streaming program, set to debut in 2019, will be priced "substantially below" that of perhaps its soon-to-be-biggest streaming rival Netflix, Inc. NFLX, according to the Mouse. 

The Analyst

Wells Fargo's Marci Ryvicker.

The Rating

Ryvicker maintains an Outperform rating on Disney's stock with a $116 price target. (See Ryvicker's track record here.) 

The Thesis

Disney's streaming platform will cost "significantly less" than Netflix, but probably won't be as low as the CBS Corporation CBS All Access platform, Ryvicker said in a note. The initial pricing strategy is intended to convert Disney's "gigantic customer base" into subscribers, the analyst said. Over time, the price will be moved higher as Disney adds more content to the platform, according to Wells Fargo. The pricing strategy should be viewed as an "incremental positive," since streaming video stocks tend to trade on subscriber numbers, Ryvicker said.

Disney also emphasized that it doesn't need to seek out and acquire any new media assets, the analyst said. Thursday's report indicated that Disney's current cash will be allocated toward organic investments, she said.

Disney's overall earnings report was a miss across the board, but this could be attributed to multiple one-time items, Ryvicker said. The segments that fell short of expectations on an organic basis include broadcast and consumer products, which aren't considered to be drivers of Disney stock, the analyst said.

Price Action

Shares of Disney were trading higher by more than 1.5 percent early Friday morning at $102.68.

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