Jefferies reduced its earnings per share estimates for Disney, saying its new strategy will require significant investments.
Disney announced plans in August to launch a branded direct-to-consumer streaming service in 2019 and an ESPN streaming service in 2018.
The "moves position Disney to better monetize content on owned platforms, but at the same time bring Disney's future earnings potential into the spotlight. We think Disney can attract millions of paying subs, but there will be earnings per share dilution in the intermediate term," Jefferies analyst John Janedis wrote in a note to clients Friday.
"While Disney has less ad exposure than many of its peers, ESPN ratings for its non-live sports programming remains under pressure," Janedis said. He noted that advertisements from automakers and drug companies represent about 30 percent of ESPN ad revenue and the outlook for next year is weak.
Janedis reaffirmed his hold rating and lowered his price target for Disney shares to $103 from $110, representing 3 percent upside from Thursday's close.
He predicted that Disney will forgo $600 million in studio content license revenue from Netflix in 2019 and $150 million a year in television content licensing fees during the next three years. He estimates the company will invest an additional $300 million to $400 million per year to launch its new streaming services.
As a result, Janedis lowered his 2018 earnings per share estimate for Disney to $6.43 from $6.65.
Disney shares have underperformed the market this year with its shares down 4 percent in 2017 through Thursday, compared with the S&P 500's 14 percent return.
The media company did not immediately respond to a request for comment.
Shares of Disney are roughly flat in Friday's premarket session after the report.