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Shares of Walt Disney Co. rallied Thursday, after the media and entertainment giant’s “surprise” announcement that its fledgling Disney+ streaming video service has already passed 50 million subscribers.
The stock DIS, +4.92% leapt 4.6% in midday trading, but pared earlier gains of a much as 6.8% to a one-month high. The stock has now climbed 23% since closing at a 5 1/2-year low of $85.76 on March 23.
Disney said late Wednesday that global paid subscriptions to Disney+ reached 50 million within five months of its U.S. launch. The company said the service was rolled out in eight Western European countries in the past two weeks, and became available last week in India.
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“Great storytelling inspires and uplifts, and we are in the fortunate position of being able to deliver a vast array of great entertainment rooted in joy and optimism on Disney+,” said Kevin Mayer, chairman of Walt Disney’s direct-to-consumer and international unit.
The Disney+ service was first unveiled in April 2019 and launched on Nov. 12.
Analyst Alexia Quadrani at JPMorgan said she was “impressed by the surprise announcement” of the 50 million subscribers for Disney+. She said it was clear that the announcement made as Wall Street analysts have been cutting estimates for the company’s other businesses, such as amusement parks and studios.
She reiterated her overweight rating and her stock price target of $140, which is 32% above current levels.
“We view Disney+ as a core driver to the company’s extensive ecosystem of consumer touchpoints, which we believe will benefit the Parks and Studio once normal operations resume,” Quadrani wrote in a research note for clients. “Disney’s early success in transitioning its business to a digital platform will likely award the stock a higher multiple as it increases conviction in its longer-term success and path to profitability.”
Wedbush analyst Dan Ives also spoke to the “massive success” of Disney+: “To put these numbers in context, the company originally set a long-term target of getting 60 million to 90 million [subscribers] by 2024,” Ives wrote.
Among companies with competing streaming services, shares of Netflix Inc. NFLX, -0.41% lost 1.0%, Apple Inc. AAPL, +0.54% edged up 0.5% and Amazon.com Inc. AMZN, -0.20% slipped 0.4%. Shares of AT&T Inc. T, +2.23% , which competes through its Warner Communications’ subsidiary’s Home Box Office business, tacked on 1.9%.
Streaming’s New Golden Era
For Apple, Ives estimates that subscribers of its Apple+ service are tracking in the range of 30 million to 40 million, but he notes that the “vast majority” of those subscribers get the service free, as a promotion with the purchase of an Apple device.
Over the next 3 to 4 years, however, Ives said he believes Apple has “an opportunity” to gain 100 million consumers on its streaming service.
Disney’s stock has lost 27% year to date, while shares of Netflix have gained 14% and Apple has declined 8.9%. Meanwhile, the Dow Jones Industrial Average DJIA, +2.06% has dropped 16% this year.
