Is Streaming Disney Stock’s $200 Billion Catalyst?

Disney (NYSE:DIS) Q3 results show that its streaming business is gaining real momentum, helping the company offset some pressures in its TV business. However, Netflix (NASDAQ:NFLX) still wears the streaming crown. Netflix stock is up nearly 33% this year, well ahead of Disney stock’s 4% gain, and its market cap stands at a massive $500 billion, almost 2.5x Disney’s $200 billion. But here’s the interesting part. Disney’s direct-to-consumer operations may not be too far behind Netflix in terms of scale. Disney’s DTC operations brought in close to $24.15 billion in revenue over the last 12 months, compared to Netflix’s $41 billion in streaming revenue for the same period.  This gives us reason to think that Disney’s overall valuation may be underappreciated given its streaming strengths.  So can streaming drive Disney stock up by about 2x in the coming years? We believe this is indeed possible. Here’s some math.

Image by aliwigle from Pixabay

Disney’s streaming revenues grew by roughly 8% year-over-year to about $18.37 billion for the first nine months of this fiscal year, and this growth number would be higher if adjusted for the divestiture of the Disney+ Hotstar operations late last year. Sales are likely to grow to about $25 billion this year. If sales expand at about 12% annually over the next two years, it could translate into revenues of about $31.5 billion by FY’27. If Disney can improve its operating margins for streaming to about 25% compared to about 5.5% presently, it would translate into operating earnings of about $7.1 billion. We think this is possible, given that Netflix has operating margins of about 34% over the most recent quarter and Disney is still early in the monetization game.

Now, Netflix trades at about 40x its trailing operating income. If investors value Disney’s streaming operations at about 30x operating earnings, about 25% below what they currently value Netflix’s business, this would translate into an enterprise value for Disney’s streaming business of close to $213 billion. That’s actually as much as Disney’s current entire market cap. However, there’s a lot more to Disney’s business, including theme parks, TV, and sports entertainment, which brought in a combined $67 billion in revenue over the last year. If we were to add these to the mix, it’s not hard to imagine Disney stock almost doubling from current levels. Below, we provide an overview of how Disney’s streaming business has been faring and how it compares to Netflix. Should you Buy or Fear Disney stock?

Disney’s Streaming Metrics Picking Up

Disney has devoted considerable resources to its streaming operations in the last few years, and it’s finally starting to pay off. Over the most recent quarter, the direct-to-consumer segment brought in $6.2 billion in revenue, up 6% despite the disposal of the Hotstar operations last year. Operating income for the segment soared to $346 million, compared to a loss during the same period last year. Disney+ added 1.8 million core subscribers last quarter.  Disney had about 128 million subscribers on its core Disney+ services, while the Hulu service had about 55 million subscribers. Besides subscriber growth, Disney’s strategy of raising prices has also been a key driver of revenue growth. For instance, the ad-free Disney+ plan saw a $2 price hike in October 2024.

Disney’s ad-supported tier also appears to be thriving. About half of U.S. Disney+ subscribers now opt for the ad-supported version, with 37% of active subscribers currently on these plans as of last year. In fact, Disney says that it has been intentionally pushing users toward ad-supported plans by making ad-free options more expensive, and there’s good reason for this. The broader streaming industry has doubled down on ad-supported tiers as they bring in more revenue per user, given that they generate revenue from both subscription fees and advertising dollars. Moreover, ad rates could also be favorable for Disney, given the ability to better target users and also due to Disney’s high-quality family-oriented content.

Now, Netflix is still well ahead of Disney in the streaming race. While Netflix has stopped reporting its global subscriber figures, it had a total of 301 million subscribers globally as of December 2024, led by its crackdown on account sharing and its advertising push. In comparison, Disney has a total of about 183 million subscribers across Hulu, and the core Disney+ offerings. Netflix’s average revenue per user (ARPU) is also more attractive, standing at over $11.50 per month globally in 2024, compared to $8 for Disney+ although the Hulu service has higher average monthly revenues of about $12 per month.

How Disney’s Streaming Could Be Re-rated Higher

While Netflix has seen stronger momentum versus Disney, we believe that Disney holds immense potential on account of its vast intellectual property library, which includes iconic franchises such as Marvel, and Star Wars, besides Pixar and its legacy animation assets.  To close the valuation gap, Disney must continue to boost its streaming margins while improving its subscriber additions. We believe this is possible due to a couple of factors.  On the subscriber and revenue growth front, Disney has been pushing the paid sharing feature. The option was introduced in the United States last September, allowing members to add a user outside their household for an additional fee starting at $7 per month. In comparison, Netflix launched this option in the U.S. in May 2023 to great results. We could could see similar improvements for Disney as well.

Separately, ESPN is launching a new direct-to-consumer streaming service on August 21, 2025, priced at $29.99 per month. The platform will offer access to all ESPN U.S. networks and around 47,000 live sporting events annually, along with features like multiview, stats, betting info, and fantasy tools. Starting in 2026, ESPN will become the exclusive U.S. partner for all WWE Premium Live Events, including WrestleMania and Royal Rumble. The service will also integrate NFL Network and expanded NFL content, following a recent deal that gives the NFL a 10% stake in ESPN. This move marks a significant expansion in Disney’s sports streaming ambitions and, if successful, could add a new growth driver to Disney’s overall streaming strategy and potentially bring in more investor attention.

On the margins front, Disney’s marketing costs for its streaming business are also trending lower as the platform matures, and its bundled deals are likely helping keep churn in check. Offering Disney+, Hulu, and ESPN+ together for as little as $17 per month has made the service stickier, improving retention and lowering churn. We also believe that the investments Disney makes toward its streaming business will have a long lifetime value.

Unlike Netflix, which monetizes its content investment solely via monthly subscription fees, Disney has a much larger value chain, given its theatrical business, theme parks, merchandise, and licensing operations. Disney’s content investments are likely to be much more durable, given its iconic franchises, unlike Netflix which focuses a lot on one-off shows. See our analysis of Disney’s valuation for a closer look at what’s driving our current price estimate for Disney. Also, see our analysis of Disney revenue for a closer look at the company’s key revenue streams and how they have been trending.

While there could be upside to DIS stock, the Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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