Wells Fargo: Disney Exiting Streaming Could Lift Shares 40%

In a research note, Wells Fargo analyst Steven Cahall outlined an unconventional strategy for The Walt Disney Company (NYSE:DIS), arguing that the media giant could significantly increase shareholder value by moving away from its direct-to-consumer streaming business and refocusing on content creation and licensing. Cahall suggested that stepping back from operating Disney+ and returning to a wholesale licensing model could improve earnings quality and simplify operations.

Rationale

Cahall believes that the streaming model requires massive content and marketing investments with thin margins compared to the traditional licensing model. By focusing on content production and licensing to other platforms, Disney could achieve higher and more stable returns.

Context

This recommendation comes as Disney faces pressure to achieve profitability in its streaming segment, with Disney+ losses exceeding $4 billion in fiscal 2022. In contrast, traditional entertainment segments like parks and resorts have posted strong profits.

Conclusion

While this strategy seems radical, it reflects a shift in Wall Street's thinking about media business models. The final decision rests with Disney's management, which may prefer to continue developing Disney+ as a direct competitor to Netflix.