Wells Fargo analyst argues Disney should exit streaming to boost stock 40%
Wells Fargo analyst Steven Cahall suggests that Disney should exit its direct-to-consumer streaming business to return to a pure licensing model. The proposal argues that abandoning proprietary distribution would de-risk operations and potentially generate $15 billion in annual licensing revenue by 2028.
Key Takeaways
- Abandoning proprietary distribution could generate an estimated $15 billion in annual licensing revenue by fiscal year 2028.
- Projections suggest the move would add 10% to earnings per share, reaching over $9 per share by replacing low-margin streaming with high-margin licensing.
- Disney’s global 'Pay-1' movie rights alone are estimated to be worth nearly $4 billion, triple the $1 billion Sony currently receives.
- The proposal assumes Disney would suffer zero brand or theme park damage by licensing its library to competitors like Netflix or Amazon.
Why It Matters
Exiting streaming would mark a total reversal of the legacy media strategy that prioritized 'walled gardens' to compete with tech giants. Concretely, this would transform Disney into a pure-play IP armory, removing the massive technical and marketing overhead required to maintain a global streaming platform. Within the broader ecosystem, such a move would signal that scale-based competition against digital natives like Netflix is financially unsustainable for traditional studios. Watch for whether Disney management shifts away from its current 10% operating margin targets for DTC in FY2026 toward more aggressive third-party licensing deals for its core 20th Century and Marvel libraries.
Additional Context
The proposal coincides with a broader industry return to third-party licensing. Per Variety, December 2023, Disney already began a short-term agreement to license 14 popular TV shows, including 'Lost' and 'This Is Us,' to Netflix on a non-exclusive basis. This marked a sharp pivot for CEO Bob Iger, who previously likened licensing content to rivals as 'selling the enemy nukes.' Despite the analyst's radical suggestion, current Disney leadership has focused on refining their own ecosystem, reaching 135 million Disney+ subscribers in early 2025 and projecting its first full year of streaming profitability by late 2024, per Motley Fool and Business of Apps, March 2026. Competitive benchmarks highlight the potential value of Disney's vault. In January 2026, Netflix and Sony Pictures signed a massive global Pay-1 licensing deal worth over $7 billion, according to Dark Horizons and WhatsOnDisneyPlus. This agreement, which covers theatrical releases like the live-action 'Legend of Zelda' film, reinforces the rising market value for top-tier studio content on independent platforms. While companies like Warner Bros. Discovery have also recently shared HBO titles with Tubi and Netflix (per Deadline, December 2023), Disney’s core franchises—Marvel, Pixar, and Star Wars—remain largely exclusive to Disney+ for now. Analysts suggest any further licensing of these flagship 'core brands' would be the definitive signal of a permanent strategic shift away from the direct-to-consumer model.
Read full article at m.za.investing.com
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