With upfront season now in full swing, we have already heard about some of the upfront news going on throughout the sector. And with entertainment giant Disney (DIS) recently introducing its ESPN plans, it will likely not be a surprise that Disney’s upfront will also have a lot of sports to it. That did not sit well with investors, though, who sent shares slipping fractionally in Thursday afternoon’s trading.
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Disney’s announcements on the ESPN standalone package proved a major part of its upfront as well, with Disney calling a lot of attention to this major new advertising frontier. And it certainly did not hurt that Disney was prepared to offer hefty discounts for those who decided to bundle their ESPN with both Hulu and Disney+. Disney wants to position itself as a stable platform for advertisers, and as such, it seems to be eyeing its bundles with a serious cutback on churn in mind.
Churn, for those not familiar, is the term that describes how customers sign up for a platform, then drop that platform, to move on to another. A high rate of churn does not go well for streaming platforms, since it basically means they will have no idea from one month to the next how many people they will actually reach. Thus, Disney’s plan is to make itself more sticky—more resilient—by encouraging people to stay. It is one thing to cancel ESPN, after all. It is entirely another to cancel ESPN and Disney+ and Hulu all in one fell swoop.
Optimism Reigns
While Disney should probably be more freaked out than it is around the arrival of Comcast’s (CMCSA) Epic Universe park, there are signs that it is looking for it to be a draw for Disney’s own parks instead. Parks chief Josh D’Amaro—who kind of has a vested interest in being enthusiastic about Disney parks—suggests that a new arrival in central Florida is pretty much going to mean that customers will be compelled to visit Disney while they happen to be in the area.
While it is perhaps not as axiomatic as D’Amaro seems to think it is—no state or federal law exists that requires central Florida visitors to go to Disney, nor is the equivalent true in California—he is not necessarily wrong. Certainly, some visitors will think that way. The idea of traveling all that way and not seeing everything is a tough sell for at least some of the market, and those customers will behave accordingly. Though expecting more than a trivial boost—especially given current economic conditions—may prove a bridge too far.
Is Disney Stock a Buy or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DIS stock based on 14 Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 9.26% rally in its share price over the past year, the average DIS price target of $123.56 per share implies 10.31% upside potential.
