How can Disney get back its narrative momentum?

Barclays analysts suggest Disney must overhaul its approach to regain the valuation premium it once enjoyed. The company's stock price has plummeted to multi-decade lows as investors scrutinize its near-term earnings following years of inconsistent growth. While better execution could help, Barclays argues a more comprehensive long-term strategy is necessary.

To revitalize its franchise pipeline, Disney should diversify its portfolio beyond its current reliance on Marvel, Pixar, and Lucasfilm. By forming licensing agreements or partnerships, the company can leverage its film, streaming, merchandise, and theme-park operations to tap into a wider array of intellectual properties. This approach, similar to Marvel's success, could generate significant revenue.

Secondly, Disney should focus on building aggregation scale rather than merely expanding its standalone streaming services. Combining Disney+, Hulu, and ESPN under a single subscription model could position the company as a central distributor for entertainment and sports content. Expanding the bundle to include games, merchandise, comics, cruises, and theme-park bookings may require subsidies and lower short-term margins, but it could bolster Disney's negotiating power and enhance customer retention.

Lastly, Disney should explore the potential of linear television in the face of declining pay-TV subscriptions. By utilizing ESPN, broadcast networks, and streaming assets to create smaller, targeted television bundles, the company can diversify its revenue streams and appeal to a broader audience.

Barclays maintains an Overweight rating on Disney with a $115 price target, a slight uptick from the $103.22 closing price mentioned in the report. However, the bank acknowledges several risks, including the execution of upcoming franchises, potential viewer fatigue, continued subscriber losses, and increased competition for sports rights.