The Wells Fargo analyst also says, in so many words, that’s crazy.
Disney’s market cap — the total value of all its shares — is $85 billion more than Netflix’s. This may interest you : 10 best Netflix drunkenness series in one weekend. So why is Disney+’s rating less than one-tenth that of its main streaming rival?
Wells Fargo conducted a complete reassessment of Disney and released the results on Monday, less than three weeks before the media giant reports its fiscal Q3 earnings after the market closes on August 10. Among the many takeaways from their research: The enterprise valuations of services Disney + and Netflix seem a little… off.
After crunching the numbers, Steven Cahall and his fellow WF stock analysts arrived at a current enterprise value (EV=market cap + debt) of $105 billion for Netflix. A year ago, the Netflix EV was about twice as much; in that same period, Wells Fargo calculated, the Disney+ EV was north of $150 billion. Disney’s overall direct-to-consumer (DTC) business carried an EV of approximately $200 billion.
However, according to the analysts, the current market values Disney’s entire DTC business at $51 billion – about half of Netflix. (That is, as Wells Fargo put it, “unrealistically negative.”)
It gets weirder: If you subtract Hulu (EV = $27 billion) and ESPN + (EV = $13 billion), Disney + alone is valued at… $10 billion? By comparison, according to Wells Fargo’s valuation, Disney’s “traditional” assets are worth $177 billion, with parks and experiences making up $154 billion of it.
You read that right: According to WF, the market sees ESPN+ as more valuable than Disney+, with Hulu valued at nearly 3x. The Hulu number is a commonly used valuation among investors (as well as the one co-owners Comcast and Disney go with); ESPN+’s figure takes into account what Wells Fargo called its “increasingly a la carte option.” Worth noting: They are very optimistic about linear ESPN basically going away in favor of the DTC option.
The analysts value Disney+ at $60 billion, so don’t go “Turning Red” screaming about that $10 billion. Wells Fargo opened its Monday report stating “We remain [Disney] bulls.”
Wells Fargo lowered its price target for Disney shares ( DIS ) from $153 to $130. Disney’s stock currently trades for about $102 per share, down 34 percent year to date, or twice the S&P 500’s decline in 2022. “Most of that depreciation has been trickle-down, though recession fears and headlines haven’t helped,” Wells Fargo wrote .
The analysts also lowered their forecasts for Disney+ subscribers. They now expect 213 million by the end of fiscal 2024 between Disney+ and Disney+ Hotstar, down from a previous estimate of 240 million. Of the new amount, Wells Fargo expects that 140 million will be from Disney+ itself (not Hotstar), less than 153 million. As of April 2, Disney+ had 87.6 million subscribers. Including Hotstar, the sum was 137.7 million.
As of June 30, Netflix had 220.67 million global paid subscribers. Read all about Netflix’s Q2 2022 performance here.
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