Disney the 'only credible challenger to Netflix': Analyst
Could Disney (DIS) dethrone Netflix (NFLX) from its position as the number one streamer? Maybe not at the moment, but Bernstein Analyst Laurent Yoon sees Disney as the “only credible challenger to Netflix” given its potential to gain full control of Hulu.
Yahoo Finance Live's Seana Smith and Brad Smith analyze Yoon's note.
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Video Transcript
SEANA SMITH: We wanna get to the market commentary of the day. Could Disney knock Netflix off its top spot in the streaming space? Well, according to a new note out from Bernstein, Disney is the, quote, "only credible challenger to the streaming giant."
Now, Netflix has maintained its leadership in this space despite legendary networks and tech giants alike putting their hats in the ring. Bernstein Analyst Laurent Yoon points to Hulu as a potential catalyst here, arguing that Disney has more to gain with full control of Hulu.
And a favorable resolution of the deal would likely lift an overhang on the stock, saying in a recent note that, quote, "We forecast DTC growth to outpace linear decline, supporting overall growth of Media. And Disney becoming the undisputed number two subscription video on demand."
Now, with the price target of $103, Yoon sees more than 20% upside to Disney's stock. We're seeing a bit of a lift here today, up just about a tenth of a percent. Lots to digest in this note here, Brad. But at scale, at least Bernstein arguing that they expect EBITDA margin to expand from roughly 18% today to the low 20s for the foreseeable future. And the price target multiple implies a decent premium to some of its legacy peers. But still, though, seven times turns less than Netflix, the industry leader.
BRAD SMITH: I'm just excited about the advertising on here. This is a key part of this note as well, AVOD economics. All right. So we're gonna do a short but shallow deep dive into this one. AVOD economics works. But can it scale as one of the parts of this note here?
And it caught my attention because when you think about the advertising options that are out there for not just the consumers and kind of lowering the price that they're paying based on the tier that they're opting into, but for advertisers, for marketers who are trying to run these massive campaigns on streaming platforms, knowing the amount of screen time that is paid or ultimately amassed on each of these and largely the two lion's share winners there, Disney and Netflix, the not straight-up duopoly but certainly the largest of the streaming opportunities that are out there here.
The AVOD arm is now basically higher than basic globally and also higher than standard domestically. What does all this mean here, the arm is already competitive with the standard tier. And that's what they're saying about Netflix and particularly how this relates to the larger AVOD tier. Standard tier is about $8.5 a month here.
Now, the engagement and cost of advertising slots-- the CPMs, cost per million, is typically what that would have been for many decades and years at this point-- is what cost per essential millions of views an advertiser would be paying for here.
And so all that considered, look for what Disney, what Netflix say about where their advertising tiers are showing strength, what's they're seeing in terms of revenue in those advertisers, those marketing dollars, millions, sometimes billions of dollars spent in these ad campaigns that are run on the platform that can amass to a significant revenue item for Disney and Netflix to be able to report back to investors here. I'm sorry, I'm just excited about advertising and marketing.
