Wells Fargo Securities analysts have suggested that Walt Disney Co. NYSE:DIS, an entertainment company with animated films, Pixar movies, and the Marvel and Star Wars franchises, could potentially reverse its prolonged stock-market slump by exiting the streaming-video business. Analyst Steven Cahall estimated that such a move could add about 40% to Disney's share price by allowing the company to focus more closely on intellectual property and experiences. Disney shares have lost nearly half their value over the past five years, while the S&P 500 has gained more than 70%, with Cahall identifying streaming as a major contributor to the company's underperformance. Wells Fargo maintains its overweight rating on Disney but lowered its price target from $146 to $125. The stock rose about 0.8% to $96.37 on Monday.
Cahall argued that Disney may not be positioned to compete effectively with high-volume streaming platforms such as Netflix Inc. NASDAQ:NFLX, a global streaming service, and YouTube, Alphabet Inc.'s online video platform. He also questioned whether Disney releases content frequently enough to control subscriber churn and support long-term margins. Instead of continuing to operate its own streaming service, Cahall suggested that Disney could concentrate on licensing its content library, including its animated features, Pixar films, and Marvel and Star Wars franchises. Wells Fargo believes this intellectual property could become increasingly valuable as Apple Inc., Amazon.com Inc., Netflix, Alphabet's YouTube, and Paramount Skydance Corp. compete for the licensing rights to leading titles.
Wells Fargo estimated that Disney could generate more than $15 billion in annual licensing revenue if it focused entirely on content rather than distribution, representing substantial growth compared with its licensing revenue before the company shifted toward streaming in 2019. Cahall also suggested that placing Disney's library on a competing global streaming platform may not weaken its box-office results, experiences business, or overall brand value. Investors may view the proposal as a possible path toward a more focused business model and a higher stock valuation, although Disney has not announced that it plans to exit streaming. The company is expected to report its third-quarter results next month, which could provide investors with further information about the performance and direction of its streaming operations.