Why It Matters: Warner Bros. shook up the movie industry last week by announcing all of its 2021 films will be released on HBO Max. It begs the question of how big streaming will get and whether it can replace movie theatres entirely. Disney+’s upcoming mix of new and old intellectual property makes a compelling case streaming could. And if they hit their 2024 subscription target, back-of-the-envelope math puts Disney+’s annual revenue around $25 billion.
Numbers To Consider:
- Disney says its Disney+ subscription base could grow to 260 million by 2024. It currently has 86.8 million subscribers globally, while Netflix has almost 200 million.
- The company is also raising Disney+’s price to $7.99 per month, starting in March. Do the math and you arrive at around $25 billion annually.
- Other Disney streaming services Hulu and ESPN+ have roughly 50 million subscribers combined, according to the company. Disney expects the three services to reach between 300 million and 350 million subscribers combined by the end of 2024.
Disney announced 100 new titles Thursday, and around 80% will premiere first on Disney+. Here are a few of note:
- “Star Wars: Ahsoka,” starring Rosario Dawson.
- “Star Wars: Obi-Wan Kenobi,” with Ewan McGregor reprising his role and Hayden Christensen returning as Darth Vader.
- A fifth and final “Indiana Jones” film, with Harrison Ford as the lead. (Theatres)
- “The Mighty Ducks: Game Changers,” with Emilio Estevez as Gordon Bombay.
- “The Falcon And The Winter Soldier,” an extension of the Marvel Cinematic Universe.
At first glance, $DIS stock is trading at 19x 2023 estimated EBITDA, which seems fully-priced. To put that in context, Disney traded at 15x EBITDA in 2019.
Yet I find myself using Disney+ equally as much as Netflix or HBO Max these days, and it’s clear that Disney+ has huge momentum, having gained 86 million subscribers in a year versus Netflix’s almost 200 million subscribers.
Not only does $DIS stock have a “return-from-home” trade, but Disney+ should be valued at a multiple closer to Netflix’s at 20x Gross Profit. Netflix has a $229 billion valuation while Disney has a $360 billion valuation at the time of writing.
This seems very interesting and I am considering adding it to the Big Board. I will let ROIC members know if I end up adding it as a position.