Disney Plus growth could catapult Disney's stock price more than 20% over next year, analyst says

Business Insider Finance 0 month ago
  • Disney's new streaming platform could help catapult the company's stock price as much as 20% over the next year, according to Bank of America Merrill Lynch. 
  • The bank's analysts boosted their five-year subscriber target for Disney Plus to 90 million, up from a previous estimate of 60 million. 
  • Bank of America reiterated its "buy" rating and $168 price target on Tuesday, citing the rollout of Disney Plus as a primary driver of long-term value. 
  • Watch Disney trade live on Markets Insider.

Disney's long-awaited foray into the streaming wars could help catapult its stock price as much as 20% higher over the next 12 months, according to Bank of America Merrill Lynch. 

A team of analysts led by Jessica Reif Ehrlich increased their five-year subscriber target for Disney Plus to 90 million, up from a prior forecast of 60 million.  

"Based on comparable analysis of NFLX sub growth over the last five years, we believe the accumulation and retention of 90mn subs appears achievable for DIS+, if not conservative," the firm wrote in a note to clients on Tuesday. 

For comparison, Netflix added about 111 million over the last five years with the help of some "marquis" Disney content, Bank of America added. 

Ehrlich and her team reiterated their "buy" rating and $168 price target, which is one of the highest on Wall Street, based on the long-term value of Disney Plus. 

The analysts increased the valuation for Disney's direct-to-consumer business to $37 a share, up from $22 and offsetting a drop in value for the company's legacy businesses. 

"These multiples screen rich over the near-term, however we believe they are warranted given the long-term growth opportunity / earnings power afforded by the company's compelling DTC strategy," Bank of America wrote. 

Disney's streaming platform launched on Tuesday after months of anticipation. The media giant inked deals with number of distributors including Roku and Amazon, as well as Verizon to offer one year free to the wireless carriers customers in an effort to boost subscribers. 

Disney Plus began crashing for some users shortly after launching on Tuesday morning. The company said consumer demanded exceeded even its highest expectations, according to a statement provided to Business Insider

Shares of Disney are up more than 26% year-to-date as investors have piled into the stock ahead of its streaming launch. 

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