Disney shares were rising 0.57% to $135.07 Monday, after having fallen in premarket trading, as China trade fears weighed heavily on the overall market.
UBS analyst John Hodulik maintained his buy rating and raised his price target from $128 to $165. He said near-term losses from Disney+, the company's direct-to-consumer streaming platform set to launch in November, could turn out to be wider than expected, but that its long-term opportunity looks strong.
In fact, Disney Plus' profitability could initially reach profitability sooner than expected. "We now expect the DTCI [Direct to Consumer and International] segment to reach breakeven in FY24 vs prior expectation of a $2B loss in FY24 and breakeven in FY26," Hodulik said. Improved operating leverage, combined with faster subscriber growth, would drive the earlier-than-expected profitability.
Hodulik expects the platform will have 65 million subscribers by 2024, versus his prior estimate of 50 million. Combined with the 60 million expected subscribers for Disney's ESPN Plus and Hulu, and Disney could see 125 million subscribers by 2024. By comparison, UBS projects Netflix (NFLX - Get Report) to have 300 million or more global subscribers by 2024.
Disney+ is aimed at directly competing with streaming giant Netflix (NFLX - Get Report) , Amazon's (AMZN - Get Report) Amazon Prime video and Alphabet's (GOOGL - Get Report) YouTube TV, although the last is relatively small.
Disney released details about its plans for Disney Plus on April 11, and its stock is up about 15% to $134 since then.