Mickey Misunderstood: Disney Streaming Could Be Worth $30 Per Share

Walt Disney Co (NYSE: DIS)'s move to control its own streaming platform isn't appreciated by many investors given the stock's recent weakness. But why investors are concerned is "beyond us," says Wells Fargo's Marci Ryvicker.

Disney's story is "still so misunderstood" as there are many positive moving pieces, Ryvicker commented in a research report. Of particular importance is the fact that a move to its own streaming platform at a cost of $9.99 per month to consumers would be worth $30 per share — or at the very least $10 per share in an ultra-conservative scenario. Also, the incremental cost to Disney for its streaming platform would be at most $300 million.

Meanwhile, concerns over a "substantial" increase in SG&A and marketing spend are "overblown," especially when factoring in Disney's stake in BAMTech represents a platform that is a "highly functional business with the capacity to take on more streams," the analyst added. In addition, Disney already owns many different outlets (parks and hotels, films, TV, etc) where it can more effectively advertise its streaming product.

"We don't think the market is giving DIS any credit for vMVPDs (virtual Multi Video Programming Distributors), which are about to take off," Ryvicker emphasized.

In fact, it is likely that no one on the Street is giving Disney any credit for potential upside in its streaming app, the analyst concluded. Since Disney is expected to show a mid-single-digit to a high-single-digit growth in EBITDA and operating income over a five-year period, the stock is looking particularly attractive.

Ryvicker maintains an Outperform rating on Disney's stock with an unchanged $116 price target.

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