Streaming Wars: Disney Storms Out of the Gate

Disney (NYSE:DIS) stock has jumped 14% over the past month as of close on November 25. It released its fourth-quarter and full-year results for 2019 earlier this month. What was even more significant was the launch of Disney Plus on November 12.

It finished the fiscal year with a Q4 that saw profits dip as it poured resources into its shift to online entertainment. Adjusted earnings per share fell 28% year-over-year to $1.07, but this still beat analyst estimates. Net income for the full year fell 17% from 2018 to $10.4 billion.

Unless you have been sleeping under a rock, you’re probably aware that Disney+ launched this month. The platform arrived with a bang, and reportedly signed up more than 10 million subscribers in a little over 24 hours.

HBO Now took three years to reach that same milestone. Disney applied aggressive pricing to its platform in a bid to challenge Netflix from the get-go, and it appears to have met with early success.

The bet on streaming is a big one for Disney. Its total costs shot up 50% year-over-year in Q4 to $16.8 billion. The company’s direct-to-consumer business unit reported a quarterly operating loss of $740 million on $3.4 billion in revenues.

Disney has started hot in this war, but it will need to post sustained success to justify its massive spending into the next decade. I love the stock going forward, but investors will be paying a premium for shares that are trading near its 52-week high. The stock last had an RSI of 71, putting it in technically oversold territory.