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- Walt Disney (NYSE:DIS) has come out of the open 2.3% lower after Barclays downgraded the media/entertainment giant to Equal Weight, seeing long-term streaming guidance could be at risk.
- The firm had upgraded to Overweight in October 2018, before its first strteaming investor day. That was a period "when everything about its streaming business was conjecture."
- But since then it pulled off the most successful streaming launch ever, analyst Kannan Venkateshwar writes.
- Now the Mouse House is facing a significant slowdown in growth despite new franchise titles, hybrid movie releases and the launch of Star+, he notes.
- And while some of that may be due to growth pull-forward into 2020, structural factors may be at play as well, he says.
- In order to get to its long-term streaming sub guide, DIS needs to more than double its current pace of growth to at least the same level as Netflix (NFLX +0.5%)," he says. "We believe this may be tough to do.
- Growth in India is also a function of cricket rights resetting after next year, he notes. Barclays is taking its estimates for Disney + Hotstar subs to about 200 million in 2024, vs. the midpoint guidance of 250 million.
- And if Street estimates on the subscriber-growth front are revised lower, it could force a shift in valuation framework away from revenue multiples to an earnings multiple - and assuming peak pre-streaming P/E multiples on present 2024 consensus EPS would imply "meaningful downside" to the stock.
- It's cutting its price target to $174 from $210, roughly even with the current $172.49.