Wells Fargo says Disney could gain 40% by exiting streaming

What happened

Wells Fargo maintained an Overweight rating on Disney but lowered its price target to $125 from $146, citing the streaming business as a drag on shareholder value. Analyst Steven Cahall proposed a radical shift: Disney should exit streaming distribution entirely and become an 'arms dealer' - producing content and licensing it to rivals like Netflix, Apple TV, and Amazon. He estimates Disney could generate over $15 billion annually in licensing revenue by focusing purely on content rather than distribution. For context, Sony earns $1 billion a year from Netflix for its movie output deal, and Disney's vastly larger library - including Pixar, Marvel, and Star Wars - could command far more. Disney+ has struggled with subscriber declines, falling from 164 million in 2023 to 132 million by Q1 2025, while Disney shares have dropped 46% over five years even as the S&P 500 gained over 70%.

Why the stock moved

This is a peer-level strategic debate rather than a direct catalyst, but it highlights mounting frustration among analysts and investors over Disney's streaming strategy. Wells Fargo's thesis suggests Disney is forgoing billions in potential licensing revenue by keeping hit films like Toy Story 5 exclusive to Disney+ instead of selling rights to Netflix or other platforms. The analyst argues that pivoting to a licensing model could unlock significant shareholder value and de-risk the business model, which may resonate with investors seeking clarity on Disney's path forward. Disney shares were flat in premarket trading following the note, but the 40% upside scenario outlined by Wells Fargo underscores how much value the market believes is trapped in Disney's current strategy.

Bigger picture

The broader streaming landscape has matured, and growth has slowed across the industry. High-volume platforms like Netflix and Amazon can absorb content costs more efficiently, while Disney's release cadence may not be enough to prevent subscriber churn over time. Wells Fargo's proposal reflects a deeper question facing legacy media companies: is owning distribution worth the capital intensity and subscriber volatility, or should they lean into their core strength - world-class IP - and let others handle the last mile to consumers? If Disney were to license aggressively, it could stabilize cash flows and redirect capital toward theme parks and theatrical releases, where margins remain strong. However, exiting streaming would be a dramatic reversal of the 2019 pivot that reshaped the company's identity.

What investors watch

Disney reports Q3 earnings early next month, where streaming subscriber counts and profit margins will be critical. Investors will scrutinize whether Disney+ can stabilize its user base and improve unit economics, or whether the platform continues to bleed subscribers and justify Wells Fargo's skepticism. Any commentary from management on licensing strategy or streaming economics will be closely parsed. Broader sector trends around content licensing deals - especially comparisons to Sony's Netflix agreement - will also be in focus as the market weighs whether Disney should double down on streaming or return to its roots as a content powerhouse.