MoffettNathanson analyst Michael Nathanson has cut his global subscriber target for Walt Disney streamer Disney+ below the company’s 2024 target range, citing the recent loss of the streaming rights for Indian Premier League (IPL) Cricket to Viacom18.
“We now expect the company to come in below its 230-260 million guidance with 213 million as Disney+ Hotstar (in India) drops down to roughly a third of subs (versus the 43 percent estimate previously),” he wrote in a Friday report.
Despite the lower Disney+ subscriber forecast, the Wall Street expert said his financial estimates for Disney’s direct-to-consumer (DTC) unit earnings before interest and taxes (EBIT) actually improved, swinging to a fiscal year 2024 profit of $300 million from a forecast loss of $310 million. The driver: “removing our estimated jump in IPL costs needed to secure the rights.”
Given the Indian cricket rights auction and Netflix’s recent subscriber losses, Wall Street observers have wondered if Disney, led by CEO Bob Chapek, may reduce its streaming user guidance for 230 million to 260 million subs by 2024. In May, Disney disclosed that it added 7.9 million subscribers in its last quarter to hit 137.7 million total.
“We chose not to proceed with the digital rights given the price required to secure that package,” Rebecca Campbell, chairman, international content and operations at Disney said in a statement after the cricket auction that saw the conglomerate’s Star India service secure the exclusive TV rights package for the 2023-2027 Indian Premier League cricket seasons for a reported $3 billion. “We made disciplined bids with a focus on long-term value.” Just like its rival media giants, has been facing a steep rise in content streaming rights worldwide.
Nathanson continues to have a “market perform” rating on Disney shares, but on Friday cut his price target by $5 to $120. Disney will report its fiscal third quarter earnings on August 10.