UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

The streaming video landscape is dominated by Netflix, Inc. NFLX and Amazon.com, Inc. AMZN, but UBS says Walt Disney Co DIS can position itself to become a leader as well with its own streaming ambitions.

The Analyst

UBS analyst John Hodulik maintains a Buy rating on Disney's stock with an unchanged $128 price target.

The Thesis

Among the entire traditional media space, Hodulik said only Disney boasts the necessary scale, brand recognition and portfolio of content to be considered in the same category as Netflix and Amazon. Specifically, Disney could gain five million global subscribers within the first year of operation and 50 million in five years. Aside from its own platform, Disney's investment in Hulu will give it a "second leg" and help gain exposure to the attractive streaming video space which values Netflix's stock in excess of $100 billion.

Despite an encouraging outlook in the streaming space, Disney's push will result in a negative impact to earnings in the near term, the analyst wrote in the note. In fact, it won't be until 2024 when the streaming business is likely contribute upside to earnings. Beyond 2024, the streaming business can contribute long-term upside to earnings as the company takes advantage of the continued shift towards streaming content and other favorable industry-wide trends.

Price Action

Shares of Disney were trading at $111.79 Tuesday afternoon.

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Everything We Know About The Disney+ Streaming Service

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