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Analyst: Verizon Partnership Is Great News For Disney, Bad News For Netflix

Elizabeth Balboa

Verizon Communications Inc. (NYSE: VZ) believes in the magic of Walt Disney Co (NYSE: DIS).

The company announced Tuesday its 4G LTE wireless, 5G unlimited wireless and Fios home Internet customers will receive 12 months free access to the Disney+ streaming service. The Street considers the deal a boost for Disney and a setback for Netflix Inc (NASDAQ: NFLX).

The Analyst

Tigress Financial Chief Investment Officer Ivan Feinseth continues to recommend purchase of Disney and avoidance of Netflix, the latter of which he suspects could slip below $230.

The Thesis

Before Tuesday, Feinseth considered Disney the “King of Content” and the favorite to win the so-called streaming wars. The Verizon deal strengthened his confidence.

“The partnership has an addressable market of approximately 20 million customers and could easily add 12-15 million Disney+ subscribers,” Feinseth wrote in his daily newsletter. “In addition, there is potential upsell to the Disney+ Bundle, which includes ESPN+ and an advertising-driven version of Hulu for $12.99, but there will most likely be an incremental increase of $6.00 for targeted Verizon customers.”

Disney’s gain is Netflix’s loss. The streaming competitor plunged 4% on Tuesday off Verizon’s announcement.

“Netflix is increasingly vulnerable to losing millions of subscribers with the upcoming launch of Apple Inc. (NASDAQ: AAPL)’s Apple TV+ starting November 1st and Disney’s Disney+ premiering November 12th,” Feinseth wrote.

“While Netflix currently dominates the consumer video streaming market, I continue to highlight that the new competition has vast libraries of content combined with strong consumer brands, combined with strong balance sheets and free cash flow to invest in content development and new customer acquisitions.”

Feinseth expects Disney to surpass 160 million subscribers and supplant Netflix as the leading streaming platform by 2022. At that point, he anticipates struggles for Netflix in both multiples and valuation.

Price Action

At time of publication, the stocks traded up marginally with Netflix at $268.01 and Disney at $133.

Related Links:

Verizon Inks Deal For Disney+, Netflix Investors Show Concern

Disney Streaming Service Poised For Quick Ramp, Says Bullish Morgan Stanley

Latest Ratings for DIS

Date Firm Action From To
Sep 2019 Initiates Coverage On Outperform
Sep 2019 Maintains In-Line
Aug 2019 Maintains In-Line

View More Analyst Ratings for DIS
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