One analyst, who describes himself as bullish on Discovery, sees the company’s new streaming service, discovery plus, breaking even in 2023 and reaching 64 million global subscribers by 2025.
“While management did not provide subscriber/financial guidance, we found the pricing, go-to-market strategy, and breadth of programming as uniquely compelling, and have greater conviction in Discovery’s ability to adapt and succeed in an increasingly streaming video world,” Kutgun Maral of RBC Capital Markets said Monday in a research note.
(Discovery CEO David Zaslav was scheduled to speak at the UBS media conference for investors Monday morning, but it was scuttled by technical glitches at the investment bank.)
Maral called his projections for Disney Plus conservative, but raised his target price for Discovery stock to $35 a share from $26 on the company’s direct-to-consumer plans.
For 2021 Maral sees Discovery Plus generating 8 million subscribers in the U.S., with Verizon contributing 4.1 million of those. He sees discovery plus adding 6 million more subscribers in 2022 for a total of 14 million, with the service growing to 20 million U.S. subscribers by 2025.
He sees U.S. revenue from discovery plus being $236 million in 2021, with $65 million coming from advertising and $172 million coming from subscribers. That will grow to $1.735 million in U.S. revenue by 2025, with $682 million coming from advertising and $1.054 from subscribers.
Discovery Plus will also have 12 million international subscribers in 2021. That will grow to 20 million in 2022 and reach 44 million in 2025. International revenue will be 289 million in 2021. That will rise to $576 million in 2022 and reach $1.44 billion in 2025.
Globally, he see Discovery Plus with 20 million subscribers in 2021 and 34 million in 2022, reaching 64 million by 2025. Revenue will be $525 million in 2021, $1.235 billion in 2022 and $3.175 billion in 2025, which it will be growing at a 16% clip.
Maral sees Discovery’s DTC business losing $750 million in 2021. Losses will drop to $434 million in 2021, before breaking even in 2023, when operating income before depreciation and amortization is $19 million. Operating income will grow to $281 million in 2024 and $500 million in 2025.
“Discovery now has the opportunity to credibly prove to investors its underappreciated value in the evolving streaming ecosystem, and we expect execution against subscriber and topline growth will drive a sustainable re-rating,” he said.
