Disney's (DIS) streaming services are the main event attraction that has shareholders buzzing on Thursday.
Shares of the company have been volatile on Thursday, but more details on its long-awaited video streaming service could quickly shift the trajectory. Disney's Investor's Day webcast begins at 5 pm ET.
"The streaming story is the biggest piece," said Trip Miller, managing partner of Gullane Capital, a Memphis-based investment firm that touts Disney as a major holding. "The good news is they've already got the content figured out."
The service is expected to feature around 500 films and about 7,000 episodes of Disney TV on top of scheduled movie productions planned specifically for the new Disney+ platform.
He explained that this is a key differentiating factor from Netflix (NFLX) , which is still burning cash at a rapid rate in order to fill out its own platform.
"There are a lot of other streaming outlets out there," Miller points out, "But I'd say it's Amazon (AMZN) , Disney, and Netflix along with satellite cable companies that are really competing. The question of where Apple (AAPL) falls into this picture is something to watch too."
Miller added that if Disney can capitalize on the opportunity it could lead to significant share growth, but was quick to point out the CEO Bob Iger is running a healthy business even outside of the emerging opportunity.
"If Disney completely fumbles this, they'll probably still figure it out in the long term," he told Real Money. "The same goes for Apple and Amazon. But if Netflix gets it wrong, they go to zero."
The backlog of content should also help the company keep its price point attractive, especially as Netflix has shown a need to raise prices to keep up with its cash burn.
As a result of the comparative factors, Miller said he is much more comfortable with his investments in Disney than taking any chances with the streaming competitor.
Another question that will come for Iger and Co. is regarding the user experience for a consumer base that has become comfortable with Netflix, and could prove sticky.
Analysts remained largely unconcerned, forecasting full details and a demonstration of its use.
"As Disney unveils its Disney+ service, we expect an impressive user interface, wide device availability, and an impressive list of launch distribution partners, along with what will be the best line-up of library and pay movie brands ever made available in a streaming service, while its originals are likely to be high quality as well," Credit Suisse Doug Mitchelson said. "We expect management to outline its Disney+ business model including inputs to create a forecast (price, launch timing, costs), while we do not expect overall Disney EPS guidance."
The clarity on the product launch would also set it apart from Apple, which declined to give price points for many of its new services products at their launch earlier this year.
Still, waiting could be advisable as betting on Iger's remarks for the event may be too much of a gamble, especially given the stock's surge in the week's leading up to the event, a move that is currently challenging charts.
"We want members to fully understand that numbers (earnings expectations) are going to come down when Disney speaks on Thursday, but this will not be the result of a struggling business," the Action Alerts PLUS team commented. "Numbers will drop due to the amount of investment required to usher in and advance the new direct-to-consumer strategy that will keep Disney competitive in where the industry is going - direct to consumer streaming services."
Additionally, the removal of content from licensing agreements will sting the bottom line in the near term.
The AAP team noted that this makes the stock more attractive in the long term for those not looking to simply time the stock.
"The associated costs will be necessary for future success, and the market tends to apply a higher premium on those companies who can successfully build out this strategy," they advised. "Netflix is the key example."
Barclays analyst Kannan Venkateshwar backed up that analysis in terms of total addressable market that the House of Mouse can tap into.
We believe the global TAM for Disney+ is 455 million [people] and the company has the potential to add 170 million subscribers between Disney +, Hulu, and ESPN+ by 2025," he said. "If borne out, this would make Disney's OTT comparable in scale to Netflix and Amazon."
All the analyst are underestimating Disney sub potential. They will sign up millions in the first month. Hopefully they launch in fall. $dis— Ross Gerber (@GerberKawasaki) April 10, 2019
Given the valuation implications, the excitement over the unveiling could well be justified.
But be careful not to be overeager, as the execution of the new strategy will be just as important as the opportunity and that will take time to develop beyond the announcement.