Disney (NYSE: DIS) will double its earnings by 2024.
That’s according to Morgan Stanley, which says that Disney will double earnings per share from $6.50 in 2020 to between $11 and $12 by 2024 spurred by momentum from Marvel content and its new Disney+ streaming service.
“For all the complexities of Disney’s business model transition and the stock’s investment case, the durability of its content underpins everything,” wrote Morgan Stanley analyst Benjamin Swinburne in a note to clients from Tuesday.
Swinburne added that the slate of content from Marvel plays “perhaps the most critical role” in building Disney+’s value for customers.
So far this year, the stock is up nearly 31% after being range-bound for nearly three years. In early April, Disney’s management laid out their plans for the Disney+ streaming service, sending the stock soaring. It is up more than 20% since that announcement.
While Swinburne noted that there will be challenges to overcome in launching its new streaming service, including stiff competition from the likes of Netflix (NASDAQ: NFLX) and other established streaming players, Disney’s “brands and content position give it a strong chance of success.”
Disney+ is set to launch in November at just $6.99 per month with no advertisements. Swinburne said that the company’s goal of attracting 60 to 90 million subscribers to the service by 2024 is realistic given that “Marvel has broken beyond fanboy demand to mass market,” though he believes the company is underselling its potential and predicts a customer base of more than 130 million subscribers by then.
If Swinburne’s forecast turns out to be correct, that would add roughly $11 billion to Disney’s revenue in 2024. The company’s estimated content investment of around $2.5 billion, with its current share count, would add more than $6 per share to Disney’s bottom line.
This year, Marvel’s Avengers: Endgame became the highest grossing film of all time, generating $2.79 billion in ticket sales. At Comic-Con this past weekend, Disney’s Marvel announced an ambitious new slate of projects for both movie theaters and the Disney+ platform with several Avengers spin-offs in the works for Disney+ that will “help lock in Marvel fans between theatrical releases,” Swinburne said.
The Marvel content will also play a big role in securing international streaming subscribers, Swinburne noted. The company estimates that roughly two-thirds of its subscribers to the service will come from outside of the U.S. due to the broad appeal of the Marvel brand.
Swinburne issued an Overweight rating on the stock with a $160 price target, suggesting possible upside of 12% over the next twelve months.