The Disney+ Launch Looks Like a Sell the News Event for Disney Stock – Yahoo Finance

The hype around Disney (NYSE:DIS) has again brought attention to Disney stock. The company will soon launch its streaming service Disney+ and release a new Star Wars movie. Since DIS has not moved significantly in recent months, some now wonder if the equity finally has a new catalyst.

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Unfortunately, both history and profit forecasts could instead send DIS lower. Although a streaming service likely helps to boost revenue, it will not compensate for the cash one generated during the heyday of cable TV.

After Disney+ launches, investors will have to confront this reality, making the launch of its streaming service a likely “sell the news” event.

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Sentiment on Disney Improves

On the surface, it appears investors again have reasons to get excited over Disney. The upcoming release of Star Wars: The Rise of Skywalker on Dec. 20 has created more buzz. This has become the number one movie for daily ticket sales on Fandango, even though Disney will not release the film for almost two more months. Given this response, it seems fans have forgiven the disappointment surrounding The Last Jedi and Solo.

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Despite the potential benefits for Disney stock, investors will probably not care.

Instead, traders will likely focus on the long-awaited Disney+ streaming service that will finally launch on Nov. 12. Given the company’s decades-long history of producing compelling content, this could challenge Netflix (NASDAQ:NFLX), Amazon’s (NASDAQ:AMZN) Prime, and numerous other services. Longer-term, Disney+ could lead the industry as one industry analyst predicts 82 million subscribers by 2024.

DIS Has Profit Problems

Unfortunately, the profit forecast seems to indicate that the Disney+ rollout could become a “sell the news” event. DIS stock has fallen by about 10% from its 52-week high.

Even more concerning, forecasted earnings of $5.71 per share fall well short of the $7.08 per share Disney earned in 2018. Wall Street believes that Disney stockholders will have to wait years before the company can match 2018 profit levels. All of this comes despite predicted revenue growth of 17.1% this year and 18.2% in fiscal 2020.

Moreover, once the excitement of the new streaming service wears off, Disney investors will have to face a harsh reality. As our own Dana Blankenhorn points out, streaming will not come close to replacing the revenues that the cable TV channels once brought. Assuming Josh Enomoto’s prediction that Disney will win the streaming wars comes to pass, what has the company really won?

As of this writing, Disney stock trades at about $131 per share. DIS spiked higher in the spring thanks to anticipation around Disney+.

Media Networks Drives DIS stock

Still, Disney stock tends to rise and fall on the performance of its Media Networks division, which will run Disney+. Media Networks earned the most revenue in the company’s previous quarter.

This remains the case even though quarterly revenue of $6.713 billion barely came out ahead of the Parks, Experiences, and Products division, which brought in $6.575 billion over the same period. Investors should also note that Parks, Experiences, and Products brought in more revenue over the previous three quarters.

Investors may also recall that Disney stock began to stagnate in 2015 when cord-cutting began to decimate the subscriber base of the Disney Channel and ESPN.

As mentioned before, the surge in DIS in the spring came when the company finalized plans to rollout Disney+. With the stock rising and falling based on Media Networks, theme parks or a successful Star Wars movie may do little to help DIS stock.

The Bottom Line on Disney Stock

Disney stock will probably become a sell following the launch of Disney+. Without question, both Disney+ and the new Star Wars movie will generate buzz surrounding Disney.