Disney’s Game-Changer: How Streaming Could Potentially Double Its Stock

Disney (NYSE:DIS) has reached a significant turning point in its latest quarterly earnings. While traditional television continues to experience substantial challenges impacting overall profits, streaming has transitioned from being a liability to a credible profit generator. The direct-to-consumer division reported over $1.3 billion in operating profits for FY ’25, far exceeding expectations. This marks the most definitive indication yet that Disney’s streaming strategy is on track. Netflix (NASDAQ:NFLX) remains the leader in streaming. Its stock has increased by nearly 25 percent this year, whereas Disney has recorded a 5 percent decrease, and its market capitalization stands at approximately $465 billion, double Disney’s roughly $200 billion. However, here’s where things get interesting: when it comes to actual streaming scale, Disney is not as far behind as the valuation discrepancy would suggest. Disney generated nearly $25 billion in DTC revenue last fiscal year, compared to Netflix’s $39 billion from the previous year and an estimated $45 billion this year. Once a business of this magnitude becomes profitable, the valuation ramifications can be significant. This sets the stage for why Disney’s stock could potentially double from its current levels.

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Streaming Execution Is Progressing

Subscriber growth has been robust. By the end of the most recent quarter, Disney+ and Hulu achieved a total of approximately 196 million subscriptions, reflecting an increase of 12.4 million from Q3 2025. Disney+ by itself reached 132 million subscribers, a rise of 3.8 million from the previous quarter. Although Netflix retains a larger subscriber base, with 301 million worldwide as of Q4 2024, Disney’s year-over-year growth of 12% indicates the platform still has substantial room to grow.

Pricing has also been a significant factor in revenue growth. In October, Disney raised the cost of its standalone Disney+ ad-supported plan by $2 to around $12 monthly, while the premium ad-free plan saw a $3 increase to roughly $19. These adjustments are reflected in ARPUs. Disney+’s ARPU rose to $8, up from $7.30 a year prior. Hulu, benefiting from stronger pricing dynamics, continues to achieve a higher average monthly revenue of about $12.20.

The introduction of the ad-supported model is becoming crucial for the business. Nearly half of U.S. Disney+ subscribers now opt for the ad-supported tier, and approximately 37% of global active subscribers were using ad-supported plans by last year. Hulu’s ad-supported composition is even more pronounced, estimated at over 60%. Disney has been strategically guiding users toward these tiers by increasing ad-free prices, and the reasoning is clear. Ad-supported plans increasingly produce greater revenue per user, since they generate both subscription fees and advertising income. Enhanced targeting, a rapidly evolving advertising technology stack, and the appeal of Disney’s family-oriented content position these ad placements favorably for advertisers.

Comparing Disney and Netflix

The disparity between the two firms is evident, yet more complex than it may seem. Netflix has ceased regular disclosure of subscriber figures, but its last report for December 2024 indicated around 300 million global subscribers. Disney’s joint streaming audience of roughly 196 million is smaller, but still significant, especially when considering the varying stages of growth.

The primary distinction lies in profitability. Over the past year, Disney’s direct-to-consumer segment reported operating margins of merely 5.3%, in contrast to Netflix’s margins nearing 30%. This profitability divide is a substantial reason for the considerable valuation difference. Netflix is currently valued at about 44x its projected 2025 earnings, while Disney— even when accounting for its theme parks, film studios, and linear TV— rests at approximately 16x.

However, this is also where the potential presents itself. Disney’s margins are already beginning to improve as marketing expenses decrease, and the subscriber base stabilizes. As the enterprise matures, Disney’s cost structure is expected to gradually align more closely with Netflix’s. With positive trends in pricing power, ad monetization, and bundling, the margin narrative is still unfolding.

Drivers for Upcoming Growth

Disney is also launching various initiatives that could significantly enhance growth in the coming years.

The first is paid sharing. Disney commenced paid account sharing in the U.S. in September, allowing users to add someone outside their household for a fee starting at around $7 monthly. Netflix rolled out a similar program in May 2023 and experienced a surge in new signups and higher ARPUs. Disney may see comparable advantages, particularly as user engagement on the platform improves.

Another major growth driver is sports. In August, Disney launched its ESPN direct-to-consumer application. This service includes the entire ESPN suite of channels, ESPN+, and various sports programming with two subscription options, including an unlimited plan priced at $29.99 per month. Sports continue to be the most compelling remaining factor for traditional linear television, attracting substantial advertising revenue and large audiences. By delivering ESPN directly to consumers, Disney is protecting against the decline of linear TV while simultaneously creating a new, high-value source of subscription and advertising income.

Bundling also plays a crucial role. Disney is heavily focusing on its bundling strategy, offering Disney+, Hulu, and ESPN+ together for as low as $17 per month. Bundles typically lower churn rates, enhance engagement, and distribute customer acquisition costs across several products. As the significance of the bundle increases, it should help stabilize subscriber counts and gradually boost margins.

Finally, Disney’s content investments possess a longer and broader monetization cycle compared to Netflix’s approach. Netflix primarily generates revenue through monthly subscription payments. Disney, on the other hand, benefits from theatrical releases, theme parks, merchandise sales, licensing agreements, and franchise developments. Well-known brands from Marvel, Star Wars, Pixar, and Disney Animation give every significant content investment the potential for returns spanning decades, rather than just years. This creates a distinct economic model for Disney’s content engine.

How Disney’s Stock Could Potentially Double

Disney’s DTC revenues experienced a 14% year-over-year increase, reaching $22.7 billion in FY ’24, and then another 8% rise to approximately $24.6 billion in FY ’25. If revenues grow at about 12% annually over the next two years, propelled by price increases, enhanced ad monetization, and paid sharing, streaming revenue could potentially hit around $31 billion by FY ’27. If Disney can elevate streaming operating margins to about 25% by that point, compared to Netflix’s estimated 30%, the DTC segment could yield roughly $7.1 billion in operating profit. Netflix is currently trading at approximately 35x its predicted 2025 operating income. If investors assess Disney’s streaming operation at 25x operating income (a discount of around 33% compared to Netflix), that would suggest an enterprise valuation of close to $180 billion for the streaming division alone.

This already approaches Disney’s entire market cap as it stands currently. Plus, this figure does not include theme parks, television, sports, movies, consumer products, and licensing, which brought in $67 billion in cumulative revenue last year. When considering this, it becomes plausible to envision a scenario where Disney’s stock potentially doubles from current levels as the streaming turnaround becomes clearer and profit margins steadily improve. Check out our detailed analysis of Disney’s valuation for an in-depth look at what is influencing our present price estimate for Disney. Additionally, consult our analysis of Disney revenue to gain further insight into the company’s primary revenue streams and their trends.

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