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Why Disney Stock Will Soon Beat the $145 Mark

Valentin Lazarov

Disney (NYSE:DIS) is known as the happiest place on earth and for a while this year, Disney stock was one of the happiest stocks on Wall Street. DIS is up 35% in a year, while the S&P 500 is almost flat.

Clearly, investors love owning Disney stock for now.

The bullish thesis for DIS has been consistently based on the slam dunk success of its movies and parks. There were issues around the cord-cutting panic, but investors have finally come to terms with those fears.

Now, the incremental element to that thesis is the expectations for DIS’s new streaming service to rival Netflix (NASDAQ:NFLX). Bulls have few reasons to fret the event. DIS already owns a ton of content, so it’s a matter of installing a spigot, then turning it on.

Preliminary pricing information suggests that it’s going to be cheap enough that it won’t even have to compete with NFLX. Most people will end up with both services for a while at least.

But even if it did have to compete with the Goliath, I think that DIS won’t be a David. It will be a threat to NFLX instantaneously. But they can both coexist because of the diverse content that they produce. The advantage that Disney has is that it can produce its contents much cheaper than the extravagant sums that NFLX spends on its productions.

Streaming is global so the addressable market is massive. Netflix has the first mover advantage from the streaming perspective … but does it? I contend that Disney was the first mover since no one on the planet doesn’t know Mickey Mouse. So reaching their audience will not be a problem for DIS.

The incremental contribution to the Disney P&L is so potentially huge that I don’t think we can accurately evaluate it now. DIS stock sells at a trailing price-to-earnings ratio of 15X. So it’s already cheap in absolute terms and it’s nine times cheaper than NFLX. All of this means that upside in the stock price is almost a guarantee.

Source: Investorplace.com



International Financial Markets Department

Euro-Finance Ltd.



*This material should not be considered as a recommendation for buying/selling securities.