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Wall Street warns Disney's subscriber growth will be hit

Brian Sozzi, Julie Hyman, and Brian Cheung discuss the warning from analysts on how Disney+ could experience a slowdown of growth and the impact this analysis could have on the company’s stock.

Video Transcript

JULIE HYMAN: Let's talk about something else that has to do with subscriber growth, and that is Disney, because we got some analyst commentary on the company this morning. It was cut to equal weight over at Barclays. And the analyst there says the company faces a tough task to get to its long-term streaming subscription guidance.

This, of course, the backdrop for this, kind of on the other side, is that there was a report last week that Disney had talked about spinning off ESPN, which Disney then said, no, that's not the case, then pushed back against. But the underlying point being, they're looking to the streaming to-- for growth and trying to sort of-- I don't know-- maybe put a better spin on what's happening at ESPN.

BRIAN SOZZI: Yeah, no, look--

BRIAN CHEUNG: Yeah, I mean, when it comes to--

BRIAN SOZZI: Yeah.

BRIAN CHEUNG: Go ahead, Brian.

BRIAN SOZZI: Yeah, go ahead, Brian. Go ahead.

BRIAN CHEUNG: No, I was going to say, I mean, I think the ESPN story is really interesting because they're still, at the end of the day, a company that relies very heavily on the cable service model, right? I mean, every time someone subscribes to Optimum or to Fios or what have you, ESPN is going to get a cut of that money. So every time someone cuts the cord to a traditional cable subscription to get ESPN Plus, that might actually be losing Disney money, which is, I think, a reason why they're considering getting rid of ESPN, not just from the Disney Plus, Hulu bundle, but by just basically spinning off the entire company.

So I think that's why this chatter is built up. Whether or not Disney wants to do that so early on to this integration experiment, if you will, remains an open question. But yeah, Moffett Nathanson trimming their price target on Disney, I think now to $180. That's still about 2% upside from where it is today. But it does raise the question, would they be better off as separate entities? But I do agree. I think it's probably a little bit too early to make that assessment right now.

BRIAN SOZZI: Yeah, good-- a hat tip to Barclays and Moffett for stepping up here and really calling it for what it is in terms of Disney. And the stock has been dead money since early March. I know you will go to Yahoo Finance, you'll pull up a chart, see it's up 37% over the past year, thinking things are great. They're not. I mean, the park recovery has not played out, I think to a lot of the bull case out there on the-- bull cases out there on the street.

And secondarily, and Disney management has nobody to blame for themselves with all this focus now on streaming. They have pumped up their streaming service over the past year and a half being the best thing since sliced bread. They came out with guidance for 2024. Things were going so great. Well, it appears it has hit its first hiccup on the road because of all the competition we are seeing in streaming services. So it makes sense the analysts are taking a more cautious look here because things are slowing down a bit.

BRIAN CHEUNG: Yeah, we'll definitely see. I know "Black Widow" just dropped on the Disney Plus platform, so I'm probably going to give that a watch later on this week. But plenty more to talk about as we do look forward to their earnings.