Disney's decision to abandon streaming will boost its stock by 40% — Wells Fargo
Wells Fargo believes Disney's stock could rise by 40% if the company abandons its own streaming service / Photo: Unsplash/Mika Baumeister
Wells Fargo believes that Walt Disney Co., a media conglomerate and owner of theme parks, could increase its stock price by about 40% if it were to abandon its own streaming business and focus on content licensing. Disney’s stock has lost nearly 20% over the past 12 months.
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The streaming business has proven unprofitable for Disney shareholders, despite its popularity among users, according to Wells Fargo analyst Stephen Cahall, as quoted by Bloomberg. According to Cahall, the company cannot effectively compete with platforms such as Netflix and YouTube, and the current pace of new content releases may not be sufficient to retain subscribers and maintain long-term profitability.
Instead of developing its own service, Cahall suggests that Disney focus on licensing its content library, which includes Disney animated films, Pixar projects, and the Marvel and "Star Wars" franchises. According to Wells Fargo, competition among streaming platforms for rights to high-quality content will intensify, which will increase the value of these assets.
Wells Fargo estimates Disney’s potential annual licensing revenue at more than $15 billion if the company focuses on content production rather than distribution, according to Bloomberg. According to the bank, this approach should not negatively impact box office revenue, the Experiences division (which includes theme parks), or brand value.
Wells Fargo maintains an “Overweight” rating (meaning “above market,” equivalent to a buy recommendation) for Disney shares, but it has lowered its price target from $146 to $125. This is 4% below the average target price, but 30% above the closing price on July 13.
On Monday, Disney shares rose by about 0.4%. The average target price for the stock is $129, which implies a 34% increase. Wall Street is very optimistic about the company’s stock: according to data compiled by MarketWatch, 30 out of 33 analysts recommend buying the stock, two are neutral, and the remaining analyst advises selling.
This article was AI-translated and verified by a human editor
