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Citi believes Walt Disney (NYSE:DIS) may sell its 67% stake in Hulu, analysts revealed on Thursday.
The analysts also said, in parallel, they suspect Disney may secure the distribution rights to two Marvel characters held by Comcast (NASDAQ:CMCSA) — Hulk and Namor.
“Based on Hulu’s level of profitability, the sale price, and Disney’s use of proceeds, we see a wide range of outcomes from ~$3 downside to ~$13 of upside per Disney share. For Comcast, we see a balanced risk-reward of $2-3 per share in each direction, while the strategic and financial merits supports a positive move for the equity, in our view,” the analysts explained.
Citi previously suggested two paths for Disney’s direct-to-consumer business: to raise prices to narrow the EBIT gap or combine Disney+ and Hulu into a single app and increase the cadence of new releases, leaving price increases to the future.
“Following fiscal 1Q23 results, we believe the company is less interested in a mass market DTC offering. This raises the possibility that Disney may sell its Hulu stake,” the analysts claim.
“While Disney owns all Marvel IP, Universal has distribution rights to Hulk and Namor. As such, if Disney makes a Hulk or Namor film, Comcast can distribute the film on Peacock. If Hulu is sold, Disney may use this as an opportunity to secure these distribution rights.”
Although Disney does not report standalone Hulu financials, Citi assessed a range of values and estimate it is valued between $19.8 billion and $27.5 billion.
