Investment firm Needham, led by five-star analyst Laura Martin, recently stated that entertainment firm Disney (DIS) would be better off shutting down ABC than trying to sell it. The firm argues that a shutdown would create more long-term value, even though it would mean taking a one-time financial loss. The recommendation comes after ABC suspended, then reinstated, Jimmy Kimmel over remarks about political activist Charlie Kirk, which drew backlash around free speech. At the same time, FCC Chairman Brendan Carr suggested that regulators could tighten the oversight of broadcasters.
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According to Needham, closing ABC would mean writing off $10–$11 billion, or about 5%, of Disney’s $204 billion market value. However, it believes that Wall Street would treat this as a discontinued operation and adjust earnings accordingly. Furthermore, removing ABC could lift Disney’s annual revenue growth by 40–60 basis points over the next decade and boost its valuation multiple. As a result, this could unlock about $20 billion, or 10%, in added shareholder value while permanently cutting the risks that come with federal regulation of broadcast networks.
Needham also pointed to ABC’s shrinking influence. Indeed, a National MediaSpots survey found that only 0.5% of Americans watch the network, and the average viewer is 58 years old, which is well above the under-49 group that advertisers value most. Instead of holding onto broadcast, the firm suggests Disney simulcast ABC content on Hulu, which has a much younger audience with an average age of 37 and faces no FCC oversight. By offering ABC shows both live and on demand through Hulu, Disney could reach more valuable viewers, protect its revenue, and avoid regulatory hurdles.
Is Disney Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DIS stock based on 19 Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average DIS price target of $137 per share implies 22.3% upside potential.
