Investors have been bullish on Disney's direct-to-consumer service since the Covid-19 pandemic forced millions of people to find their entertainment at home. While its parks and theater businesses have been hurt, Disney is able to reap the rewards of a new streaming platform that's continuing to bring in millions of subscribers.
To satisfy consumer demand as the streaming wars heat up, Disney has been investing in exclusive content.
The stock closed at $175.72 on Friday after having its best session since March. It's now up 21% for the year, topping the S&P 500, which is up 13%.
Disney said on Thursday during its investor day that it will release more than 100 movies and shows in the upcoming years, with 80% of those going directly to Disney+. The company will also allow users to opt-in for more mature content, letting older audiences watch titles like "Atlanta" and "Modern Family."
"While we expected to hear about Disney's accelerated content investment in their DTC businesses, the sheer size and quality of the content tsunami headed to Disney+ was mind-blowing and frightening to any sub-scale company thinking about competing in the scripted entertainment space," MoffettNathanson analysts wrote in a note following the event. They recommend holding the stock but boosted their target by $21 to $160.
Several other analysts also raised their price targets on the stock.
Disney said it now expects to see between 230 million to 260 million subscribers to Disney+ by 2024. Additionally, it plans to increase the cost of the service by $1 to $7.99 a month.
"What Disney accomplished [Thursday] was to show well they understand their content, their audience, and where and when they can best be maximized effectively," said Shawn Robbins, chief analyst at Boxoffice.com. "Streaming development is clearly a priority in an effort to maintain their growing momentum on that front, but re-committing some of their biggest films to the mature and lucrative theatrical market underscores how important that avenue remains in the long-term health of their own business and the film industry at-large."
While streaming is the clear focus for Disney, it's still committed to movie theaters. While AT&T's Warner Bros. is shipping its entire 2021 film slate to HBO Max the same day it releases those titles in theaters, Disney is taking a different approach.
The company is reserving its most anticipated titles for theatrical runs while staying flexible in its releases of projects that are lower budget or better suited for a different kind of rollout.
For example, "Raya and the Last Dragon," due out in March, will arrive on premium video on-demand through Disney+ and in theaters at the same time.
However, that strategy could change. Executives reiterated Thursday that titles like "Black Widow" and "Jungle Cruise" will head to theaters as planned. CEO Bob Chapek acknowledged during the presentation that the company had garnered around $13 billion at the global box office in 2019, calling that success "not something to sneeze at." In fact, Disney had seven films tally more than $1 billion that year.
Disney investors can also start looking to a future when consumers can return to theme parks, which will eventually be back to full operation. The company also has a slate of films to showcase when movie theaters can reopen with packed houses.
Disney executives said the company is set to reach peak losses in fiscal 2021 and will achieve profitability by fiscal 2024.