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Disney+ magic fades: Barclays downgrades Walt Disney after three years

Published 18/10/2021, 15:28
Updated 18/10/2021, 15:30
© Reuters. FILE PHOTO:  A smartphone with the "Disney" logo is seen on a keyboard in front of the words "Streaming service" in this picture illustration taken March 24, 2020. REUTERS/Dado Ruvic

© Reuters. FILE PHOTO: A smartphone with the "Disney" logo is seen on a keyboard in front of the words "Streaming service" in this picture illustration taken March 24, 2020. REUTERS/Dado Ruvic

(Reuters) - Walt Disney (NYSE:DIS)'s stock received a rare Wall Street downgrade on Monday, as Barclays (LON:BARC) called for bold changes from the media giant to reverse slowing growth at its Disney+ streaming service.

Disney Chief Executive Officer Bob Chapek last month hinted at a slowdown in Disney+, saying fourth-quarter global paid subscribers will grow by "low single digit" millions compared with a rise of 58.5 million in the previous three months.

Disney+, which has one of the richest portfolios of media content, had a blockbuster launch in 2019; it attracted new subscribers with its hit "Star Wars" and "Avengers" franchises.

Rival streaming platforms such as Netflix Inc (NASDAQ:NFLX), Apple (NASDAQ:AAPL) TV+ and Amazon (NASDAQ:AMZN) Prime Video have had a different approach. They invested heavily on original content to draw in subscribers.

"While the company (Disney) appears to be targeting one new piece of content a week, not every piece of content has the same franchise value or visibility," Barclays analyst Kannan Venkateshwar said.

Barclays also said the slowdown in Disney+ subscribers could not be solely attributed to a pull forward in additions in 2020, when streaming platforms gained popularity as people hunkering down at home sought entertainment.

To achieve its target of 230 million to 260 million Disney+ subscribers by the end of fiscal 2024, Disney will need to more than double its current pace of growth to at least the same level as Netflix, according to Barclays.

© Reuters. FILE PHOTO:  A smartphone with the

Netflix, which is due to report its quarterly results on Tuesday, had 209 million subscribers as of the quarter ended June. Disney+ had 116 million paying customers.

Disney shares, which have not been downgraded by any brokerage so far this year, fell about 2% in early trading.

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