Brokerage firm Loop Capital increased its target price on Walt Disney as the firm nears the acquisition of Hulu.
Hulu to add more Disney+ content
Alan Gould, Loop Capital analyst, maintained his “buy” call on the company while increasing its target price to $130 from $125.
The price target indicates a 12% upside for the stock from the previous day’s closing price.
The upgrade comes after Disney announced it will pay $438.7 million to Comcast for the remainder stake in the streaming service, Hulu.
This amount is significantly less than the $5 billion maximum liability that had been a point of contention, providing a clear resolution and a more favorable outcome for Disney.
According to Loop Capital, this “well less” than anticipated payment provides Disney with the clarity needed to fully integrate Hulu into its burgeoning streaming ecosystem, notably Disney+ and the upcoming ESPN streaming service.
The purchase will also conclude a year-long appraisal process.
Gould said the deal would allow Disney to fully integrate Hulu’s programs to Disney+ and ESPN’s upcoming streaming service.
Disney’s Hulu bet
Disney announced in 2023 that it would buy the remaining 33% stake in Hulu from Comcast.
It had acquired a two-thirds stake in Hulu when the company integrated Fox Studios’ assets in 2019.
Disney had paid $8.6 billion in 2023, valuing Hulu at $27.5 billion. Following the payment, Disney and Comcast entered into an appraisal process.
This was originally set to be concluded by 2024.
Disney said Hulu had 50 million subscribers as of March 29. Disney has a total streaming subscriber base of 180.7 million.
The final transaction is expected to be closed before or on July 24.
Disney said the put the payment in its “net income attributable to noncontrolling interests”.
This will reduce its “net income attributable to Disney” in the company’s third-quarter financial statement.
The company added that the deal is not expected to affect the previous guidance the company made for 2025 adjusted earnings.
In November 2024, Hulu and Fox Entertainment signed a 4 year extension to a streaming deal, ensuring popular Fox shows like The Simpsons, Family Guy, The Masked Singer remain on Hulu.
Aftermath of the deal
This strategic move is expected to unlock substantial synergies and streamline Disney’s direct-to-consumer (DTC) offerings.
With full ownership, Disney can now seamlessly bundle content, optimize advertising strategies across platforms, and reduce subscriber churn.
The ability to cross-promote content between Disney+, Hulu’s general entertainment library (including popular shows from ABC and FX), and the anticipated ESPN streaming service creates an unrivaled value proposition for consumers.
According to Loop Capital’s FY2025 estimates, the deal’s valuation puts it at 3.3 times its revenue and under $500 per subscriber for Hulu Subscription Video on Demand (SVOD).
Disney shares were up slightly in the pre-market after the price target increase.
The stock has gained more than 4% in the year so far.
Most of the analysts polled by LSEG are bullish on the stock, with 26 out of 33 analysts rating it a buy or strong buy.
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