FuboTV Soars 251% After Disney Merger—But What About Disney?

 

On Monday, FuboTV ($FUBO) had an insane ride—up 251%, followed by another 23% jump on Tuesday—thanks to its deal with Disney ($DIS). But while Fubo is celebrating its massive spike, Disney's stock barely budged. So, what’s really going on here? Let’s dig in.

 

 

 

FuboTV is combining its sports-focused streaming service with Disney's Hulu + Live TV. The new entity, which will continue under Fubo’s name, gives Disney a dominant 70% stake. This merger also resolves ongoing litigation between the two companies and clears the way for their Venu launch (think ESPN-level competition with Warner Bros and Fox). This could signal the start of a larger wave of media mergers, as traditional TV players may need to team up to compete with Netflix, which is already making big moves in live sports broadcasting.

 

While this merger is great news for Fubo—explaining its stock spike—Disney’s stock only edged up 0.3%. So, what gives?

 

 

Since the pandemic, Disney’s revenue growth has slowed, from over 20% in 2019 to low single digits in recent quarters. However, recent results point to a recovery, especially in streaming.

 

 

For Q4 2024, Disney posted a 13% revenue increase, reaching $6.3 billion for the quarter and $24.94 billion for the full year. This growth was largely driven by a surge in streaming profits, with Disney+ and Hulu seeing strong subscriber gains.

 

Disney’s revenue is split into three segments:

 

- Experience Business: Contributes 60% of operating income but is losing momentum, especially in international markets.

- Entertainment Business: Streaming remains the highlight, with Disney+ adding 4.8 million subscribers in Q4 and revenue up 14%.

- Sports Business: ESPN and related services grew 5.1% in Q3 but remain steady rather than explosive.

 

Disney has solid cash flow, reporting a 15% increase in operations cash flow for Q4, totaling $5.5 billion. Free cash flow grew 18% in Q4 to $4.03 billion, with a 75% increase for the full year. While traditional networks face challenges, Disney’s streaming growth and strong cash flow provide a solid foundation for future expansion.

 

Disney appears to be on a positive trajectory, with stock price movement indicating recovery. However, its flat stock performance recently may be due to the market waiting for the company’s upcoming earnings report.

 

 

Disney is set to announce its Q1 FY25 earnings results on February 5, 2025. Analysts expect a 18.85% increase in earnings per share (EPS) to $1.45, compared to the same quarter last year. Revenue is projected to reach $24.7 billion, a 4.87% increase YoY. For the full year, analysts expect EPS of $5.41 and revenue of $94.94 billion, reflecting +8.85% and +3.91% growth, respectively.

 

Disney’s stock has been moving cautiously, trading at a Forward P/E ratio of 20.54, which is lower than the industry average of 23.05. The PEG ratio stands at 1.99, signaling decent growth potential compared to the industry's average of 2.84.

 

For Disney, there’s a lot to like. Analysts, including Redburn Atlantic, have upgraded the stock to "Buy," raising the price target from $100 to $147. Streaming profits are growing quickly enough to offset the decline of traditional TV. According to Redburn's Hamilton Faber, this signals the end of the "structural headwind" that has kept Disney’s stock price far behind the S&P 500 over the last decade. Disney’s growth in streaming, combined with a content renaissance (think Inside Out 2 and Deadpool & Wolverine), is expected to drive the company forward.

 

 

The market is always looking for the next big thing, and merging with Disney’s Hulu + Live TV creates a powerhouse that could lead to more media consolidation. It comes at a time when companies like Warner Bros and Comcast are considering their next moves. Could this be the first of many deals? 

 

While Disney is on a positive trajectory, its stock has not yet captured the same excitement as Fubo’s. We may need to wait for the upcoming earnings report to see if it sparks a more significant move in Disney’s stock price.

 

What do you think?