In the last five years, more than 700 million people visited a Disney park. According to Steven Cahall, an analyst at RBC Capital Markets, that massive number could give investors an idea of the potential size of Disney's soon-to-be streaming service.
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RBC: Disney's new streaming service could be absolutely massive (DIS)
Disney's stock price might take off after it introduces its streaming service. If visitors to the company's parks are any indication, the service will be huge.
Cahall thinks that the massive fan base that Disney has grown over the years will translate into several million subscribers when the company launches its movie and TV streaming service in 2019.
Disney announced earlier this year that it would be pulling many of its movies and television shows off of partner platforms like Netflix in order to start its own streaming service. Disney's move is part of a recent trend of content producers siloing their content behind their own paywalls to better monetize their content. CBS recently pulled most of its highly-anticipated "Star Trek: Discovery" series behind a paywall, in another example.
Cahall said that the streaming service could have 5 million subscribers in 2020 if it is priced similarly to its competition. But, if the service is priced to grow quickly, 20 million subscribers is not out of the question.
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For comparison, Netflix started its streaming business in 2007 and has grown it to 51.92 million subscribers in the US over the last decade. It has another 52 million international subscribers.
20 million subscribers could be the number that also changes how investors view the company, Cahall said. Disney currently trades at about 10 times its earnings, but its media peer group is traded at a much higher multiple. Seeing a huge subscriber number would force investors to weight Disney's media business more heavily, which could send the stock higher.
Because of his expectations for the success of Disney's upcoming streaming service, Cahall rates Disney as one of his top stock picks. Cahall has a price target of $125 for the stock.
Disney is currently trading around $100.81 and is down 4.92% this year. Disney did rise about 0.79% on Monday after Cahall's report, though.
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