Is Disney Stock A Good Buy Right Now? (DIS)

Will the ESPN+ and streaming service be enough?


In the past few years, Disney stock has been difficult to gauge due to the volatility in the streaming industry. Investors are unsure about Disney’s future in streaming which has caused the stock price to drop to more attractive levels. This may be seen as an undervaluation from some traders.

Disney’s Future

ESPN and ESPN+ Future

In the 1990’s Disney acquired Capital Cities ABC, it was a great source of revenue that ensured Disney did not lose too much money during 1990’s when movie studio business was volatile.

Now, we see Disney using their movie business as their main earner, as ESPN trails behind. With cord-cutting being at an all-time high, ESPN’s paying subscriber base is falling continuously.

To prevent cord-cutting, ESPN have launched their ESPN+ streaming app at the start of the year. On the last earnings call, Iger said that he was pleased with the success that ESPN+ has had since it started. Iger did not state any specific subscriber numbers.

If Disney allow live sports broadcasting on the ESPN+ app, then a price increase would be subsequent for consumers.

In the next few months, we will see how ESPN+ performs and if it will grow its subscriber numbers. If so, then we can expect more revenue and a marginally higher Disney stock price.

In the long-term future I expect consumers will subscribe to Disney’s streaming service, which may offer ESPN’s content. So, ESPN+ will come as a bundle package with other Disney original content. DIS should have no problem generating revenue from ESPN as they own many sports broadcasting rights. Subscriber losses will be offset by higher consumer fees.

Disney Streaming Service

Late 2019 will see Disney launch their very own streaming service. This streaming service will offer only Disney and Fox original content. This is hard to imagine, as there will only be a limited amount of shows to watch in the platform’s early days. CEO Bob Iger has said that the Disney streaming service is not focusing on tv show volume. Instead, Disney are focusing on creating high-quality shows for their platform.

Unlike Netflix and Amazon, Disney will not be buying content for their platform. This may impact the subscriber numbers of the Disney streaming service, as a limited range of tv-shows may be detrimental to consumers.

Disney will face fierce competition with their streaming platform. Going against content monoliths like Netflix, Hulu and Amazon, Disney will have its work cutout to make their platform stand-out. Disney is hiring Hollywood greats like Game of Thrones producers to help create Disney’s original content.

Once launched, it will be clear to see if DIS can compete with its biggest rivals in the streaming world.

Disney Stock Price Prediction

The last few years have seen Disney stock get blown out of the water. Uncertainty is to blame when looking at the volatile Disney stock price, this has been caused by ESPN’s movie and TV show streaming strategy. Cord cutting does not help Disney’s bottom line of course. Since 2014, Disney stock has underperformed the S&P 500 significantly.

Some investors will look at the Disney stock price as a opportunity to make healthy gains in the long-term. As of now, Disney are paying an attractive dividend and boasts a long record of growth. By acquiring Fox, Disney had to borrow money to pay for the finalization of the deal. Short-term, this means that Disney has an increased debt-ratio. Long-term, the debt ratio will be negligible as the acquisition increases revenue for the company.

1-Year forecast for Disney stock is $116USD.

It is still unclear how the upcoming streaming platform will impact Disney’s long-term future. Short-term is is clear that there some issues which need to be addressed, such as ESPN struggling. These problems are likely to be fixed long-term, making DIS a potential long position if you can handle short-term volatility.

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