With Disney+ subscriber growth slowing and the pandemic continuing to weigh on the crucial theme-park business' recovery, Disney's (DIS) stock has lagged both the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) since mid-March. Year to date shares are now down about 6%.
Judging by a pair of cautious analyst notes out Monday ahead of Disney's earnings release on Nov. 10, the stock stands to stay dead money in the near-term.
"Long-term streaming guidance could be at risk," said Barclays analyst Kannan Venkateshwar in a new piece of research to clients. The analyst downgraded his rating on Disney to Equal-weight from Out-perform. He also cut his price target by 17% to $175.
Continued Venkateshwar: "This year however, Disney+ growth has slowed significantly, despite launching new franchise titles, day and date movie releases and Star+. Part of this slowdown could be a function of growth pull forward into 2020 and promo roll offs, but we believe it could be due to structural factors capping growth as we detail in the note. In order to get to its long term streaming sub guide, Disney needs to more than double its current pace of growth to at least the same level as Netflix. We believe this may be tough to do."
The analyst points to increased competition by Apple (AAPL), Amazon (AMZN) and Netflix (NFLX) on the streaming front as one key risk to the outlook for Disney+. Another consideration, Venkateshwar says, is Disney's ability to spend on content and marketing is hamstrung because of its streaming organization is structured internally.
Disney recently gave its stock bears fresh kindling.
CEO Bob Chapek said at a Goldman Sachs conference in September that Disney+ subscribers slowed in the most recent quarter. He predicted Disney+ subs would rise by "low single-digit millions" in the quarter. Disney added in excess of 12 milion subscribers in the preceding three-month period.
The commentary calls into question whether Disney could hit its fiscal year 2024 Disney+ subscriber growth of 230 million to 260 million.
MoffettNathanson founding partner Michael Nathanson said Monday it's not all roses with Disney+.
"According to our analysis, Disney will be able to hit the mid-point of their FY 2024 target for Disney+ subscribers. Yet, our forecast of 245 million subscribers by FY 2024 assumes lower RPU [revenue per user] Disney+ Hotstar subscribers will source over 45% of the sub base. As a result of this work, we are trimming our FY 2024 DTC revenue by almost -$1.6 billion. Disney+ appears to have built incredibly high brand awareness very quickly, but it hasn’t effectively penetrated the older households without kids. So the company will need to add more off-brand general entertainment content and find ways to better leverage their Hulu ownership over time," Nathanson said.
Nathanson reiterated a Neutral rating on Disney's stock with a $180 price target.