After keeping to its longer-term streaming subscriber target range, which is a significant concern for investors right now, Disney will be aiming to reproduce that.
Several Wall Street analysts have recently lowered their Disney+ projections. After Wednesday’s earnings report, Atlantic Equities analyst Hamilton Faber reduced Disney’s stock from “overweight” to “neutral”
and lowered his price target from $219 to $172, stating that the company’s customer reach in markets where Disney+ has launched was nearing maturity.
Others maintained their stock ratings intact on Thursday but emphasized that investors should exercise patience and that Disney will require more investment. After all, the entertainment juggernaut has claimed that it will not hit its full original content and streaming subscriber growth stride until next year when new programming and market debuts will aid.
That should start to appear in the second half of its fiscal year 2022, which begins on October 3, with the third calendar-year quarter set to be the first in which the service distributes originals from all of its major brands.
Disney+ attracted only 2.1 million subscribers in the latest quarter ended Oct. 2 to reach 118.1 million, its weakest growth quarter since its introduction two years ago. But the entertainment behemoth confirmed its estimate of 230-260 million Disney+ customers by the end of 2024.
Morris also pointed out that this will necessitate increased program spending. As it invests in more local and regional programming, Disney aims to increase its previous content spending forecast (formerly $8-9 billion in fiscal 2024). (340-plus local original titles currently in production).
We raised some reservations about Disney+’s content strategy.
“Based on a fiscal fourth-quarter content surge (that will be typical of the content pipeline in fiscal 2023 and beyond) and the timing of several new regional launches, management anticipates Disney+ ads in fiscal 2022 to be back half-loaded,” he said. “We remain doubtful that more Star Wars/Marvel/animated/family programming will be enough to bring Disney+ up to parity with Netflix’s audience.”
Todd Juenger, a Bernstein analyst, went even further. He said in his assessment that “the pace of Disney+ net additions continues substantially below the run-rate required to achieve the midpoint of the fiscal year 2024 forecast.” “Apart from future market openings, the re-acceleration is expected to occur in the fourth quarter of fiscal 2022, when the entire cycle of new original content begins to enter the service.”
However, we believe the core concept (that more material equals more subscribers) is questionable.“
“Who is this consumer who wasn’t interested in Disney+ when it had the library and some original Marvel and Star Wars content but will become interested when there are twice as many of the same brands of original stuff?” he continued.
We have yet to find a toddler who will refuse one scoop of ice cream but will happily accept two.”
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