Shares of Disney (DIS 0.16%) have been hammered this year, and it's no secret why. Investors had placed high hopes on its new streaming business, led by Disney+ and Hulu, but growth has slowed and losses are mounting.

The company's streaming segment lost $1.5 billion in its most recent quarter, and $4 billion for the fiscal year. Though it added 7.8 million domestic subscribers over the last year, average revenue per user fell 10%, meaning revenue at the marquee streaming platform grew just 7%. 

Despite the disappointing performance, Disney+ has one unlikely fan, who thinks the streaming service is going to be a big winner in the long run.

Netflix-approved

At the New York Times' Dealbook Conference last week, Netflix (NFLX -9.09%) co-CEO Reed Hastings praised Disney+. Asked what he thought about the company as CEO Bob Iger returns, Hastings said:

Disney is very likely to be a big success in streaming. They've got incredible [intellectual property]. They've got hundreds of millions of subscribers. It'll be at least the two of us duking it out for a long time.

Hastings, who also lauded Bob Iger, seems to consider Disney to be Netflix's top rival now, and he saw the two companies leading the streaming race for the foreseeable future. It's not the first time Hastings has praised Disney+, either. 

In 2020, the Netflix co-founder said Disney had succeeded in disrupting itself, adding that the rapid early growth in Disney+ was "stunning."

Is he right?

It's easy to see why Hastings, who probably knows the streaming business better than anyone, is so convinced that Disney will be successful. The entertainment giant has a number of built-in advantages, including a family entertainment brand established over generations, and intellectual property ranging from early Disney animated classics like Snow White and Cinderella to its relatively recent acquisitions of Pixar, Star Wars, and Marvel.

So Disney has the components needed to build a profitable, successful streaming service. It already has more than 100 million Disney+ core subscribers, which should give it a sufficient subscriber base to fund top content.

The good news for Disney stock and its investors is that the company expects losses from streaming to start narrowing. Management said on the recent earnings call that it expects streaming losses to diminish by at least $200 million in the fiscal first quarter of 2023, and that it expects the streaming business to reach breakeven by 2024. 

The company is launching its ad-based tier this month and raising prices on ad-free Disney+ from $7.99 a month to $10.99 a month, while adding ads to the $7.99 monthly plan. It's also raising the price for its streaming bundle that includes Hulu and ESPN+.

The price hikes and the ads will help the company reduce its operating loss, and management said it would scale back on marketing and optimize other expenses.

Is Disney stock a buy?

With Bob Iger back as CEO, Disney could reach profitability in streaming even sooner. Iger has promised to prioritize streaming profitability above subscriber growth, and he intends to restructure the company to put storytelling at the center, though the effort may also include layoffs and other cost-cutting measures. Iger must walk a fine line between telling the right Disney story and delivering the profits that shareholders expect.

Disney right now is priced as if its challenges will persist. If the company can deliver on its promise to make streaming profitable by 2024, the stock should have a lot of upside since its theme parks business has been on fire as pandemic restrictions have fallen.

With the operating losses in the streaming segment expected to diminish, now could be a great time to buy Disney stock because the worst looks to be behind it.