Walt Disney (DIS -0.29%) is one of the most popular stocks on the Robinhood investment platform, and it isn't hard to see why. The media giant is at the beginning stages of monetizing its streaming business, allowing investors to get in on the ground floor of a massive growth opportunity.
Let's explore the reasons why the House of Mouse could make an excellent addition to your investment portfolio.
Bouncing back from the crisis
Disney used the coronavirus pandemic as an opportunity to update its business model for an increasingly digital world. In October, the company announced plans to reorganize its media and entertainment divisions around streaming. And its fiscal first-quarter report, (which went live on Feb. 11 ) demonstrates this new focus.
Revenue was down 22% to $16.2 billion -- which is mostly unchanged from the fourth quarter when sales fell 23% against the prior-year period. The company now breaks down revenue into two reporting units: media and entertainment distribution (which fell 5%) and Disney parks, experiences, and products (which fell 53%).
Disney's amusement parks are still in rough shape. But the rollout of COVID-19 vaccines could be a tailwind. According to Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, "virtually everybody" who wants a vaccine will have access to one by April. And Disney's CEO Bob Chapek believes this could be a "game changer" that would give people the confidence they need to return to Disney's parks.
Could Disney be the next Netflix?
While Disney's amusement park business waits for recovery, the fast-growing streaming business looks poised to power long-term growth. Direct-to-consumer revenue surged 73% to $3.5 billion to represent roughly 21% of total sales in the period. Disney now boasts 95 million paid subscribers on its core Disney+ platform. The subscriber count jumps to over 146 million when including ESPN+ and Hulu.
Management plans to keep the momentum going by expanding globally and leveraging Disney's industry-leading intellectual property to create original content. The company plans to roll out its Star entertainment platform (which includes television and film content for adult audiences) to international markets this year. And it is working with film director Ryan Coogler to develop a Black Panther-inspired series for Disney+.
While Netflix still enjoys a lead in the streaming wars, Disney is rapidly catching up. The House of Mouse expects to have between 230 million to 260 million paid subscribers by 2024. To put that in perspective, Netflix reports roughly 204 million subscribers as of the fourth quarter of 2020 and generated an operating income of $4.6 billion over the trailing 12 months.
Walt Disney is a buy
Successful companies turn challenges into growth drivers, and Disney is a perfect example of this. The company used the coronavirus pandemic as an opportunity to build its streaming business, which is now evolving into an industry leader. Now is the time for investors to get in on the ground floor of this epic transformation.