Disney will surge 29% to street-high price target of $200 as streaming plans surprise to upside, Goldman Sachs says
- The upside potential in
Disney's streaming services will drive the stock 29% higher to $200, according to a Friday note from Goldman Sachs.
- Disney's analyst day on Thursday revealed the company's ambitious streaming plans for
Disney Plus, which surprised to the upside, Goldman said.
- Disney surged as much as 11% to record all-time highs in Friday trades. Here are the 3 reasons why Goldman expects the record rally to continue.
- Watch Disney trade live here.
Despite a global pandemic that shuttered two crucial components of Disney's business - movie theaters and theme parks- the company is firing on all cylinders thanks to its well-timed pivot to streaming.
With more than 86 million users subscribed to its Disney Plus platform as of early December, Disney managed to hit its 5-year target of 60 million to 90 million subscribers in its first year of launching the $6.99/month service.
Disney surged as much as 11% to record all-time-highs on Friday following the company's analyst day on Thursday, which revealed the company's ambitious plans for its streaming services, including Disney Plus.
And Goldman Sachs believes the rally can continue. The firm set a street-high price target of $200 for Disney, representing potential upside of 29% from Thursday's close.
Goldman was impressed with Disney's streaming plans, and said they surprised to the upside.
Here are the 3 reasons why Goldman expects Disney to continue hitting record highs.
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1. "Disney's updated long-term targets for its Disney+/Star DTC streaming services are materially above our prior base case estimates, and we believe well ahead of investor expectations," Goldman said.
Disney now expects to reach 230 million to 260 million Disney+ subscribers by FY2024, well ahead of Goldman's prior estimate of 165 million.
"We believe this outlook is attainable, especially as it broadens the service's content offering to include new programming from Star outside the US," Goldman said.
2. "The company's plans to increase the price points for Disney+ in the US and in key European
Disney revealed plans to increase the price of its streaming service by $1 in the US early next year, to $7.99 from $6.99, and in some European markets by 2 Euro to $8.99 Euro per month.
"This should help offset's Disney's plans to produce more content for its DTC platforms and bring previously planned content onto its DTC platforms faster than initially expected. As such, Disney did not push back its estimated timeline for its DTC services to achieve breakeven (which we also believe investors will see as an upside surprise)," Goldman said.
3. While Disney is leaning into its DTC offerings, it remains committed to key legacy platforms," Goldman said.
Disney plans to continue releasing key franchise films into theaters, and though the company sees big potential for its ESPN+ streaming service, it is not looking to pivot its ESPN franchise away from traditional cable distribution as quickly as it has for its family and general entertainment content.
"We believe this shows that Disney is not utilizing a one-size-fits all approach to content monetization, but rather a balanced strategy that optimizes the value of various content platforms and distribution partners," Goldman explained.
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