Source: PaxForex Premium Analytics Portal, Fundamental Insight

Disney has had an epic rise this century, acquiring Pixar, Marvel, and Lucasfilm and then launching the fastest-growing streaming service in history. But the growth story of these media stocks may be just beginning. 

The combination of Disney+, Hulu, and ESPN+ brings the whole world of new possibilities for Disney to develop its business. At the same time, it gets rid of the middlemen who have long managed how Disney reaches consumers. As a result, the company becomes even more powerful, so we should all pay more attention to Disney stock. 

In the movie business, Disney has always depended on distribution partners to reach end consumers. At the box office, Disney keeps only about 60% of its ticket revenues and shares the rest with theater operators. But Disney+ is breaking that tradition, as evidenced by "Black Widow" streaming revenue of $60 million on opening weekend, opposed to $80 million at the home box office, of which Disney keeps about $48 million. 

The cable business is the same. ESPN has long been the most profitable cable network, but it still has to sell itself to cable operators, who then sell to end consumers. Streaming eliminates the cable operator, which should boost margins in the long run. 

Disney is getting out from under the constraints imposed by the old media world. It opens up new opportunities for long-term business growth, and Disney may be in a better position than any other media company. 

Ben Thompson of Stratechery described one of the Internet's biggest upheavals as moving from a world of scarcity to a world of abundance. The newspaper had only a certain number of pages a day for content, and the Internet has virtually unlimited space for the content of all types. Televisions used to be limited by the number of channels and hours in a day, while the Internet allows you to get the entire world of content at any time and at the touch of a button. 

This trend will improve media since media companies don't need to cover as wide a market as possible, they can distribute valuable niche content. For instance, if you're running ABC today and you're thinking about licensing sports content, you want sports to appeal to the largest number of people possible because your channel goes to almost every home in the country. So the big money for content goes to soccer, baseball, basketball, and hockey. 

In a world of abundance, the passion and intensity of the fans are more important. Formula One may not have as large an audience as the NFL, but its fans are very active. The same is true of soccer, cricket, and the UFC. A streaming service offering these niche sports may have more intense and devoted fans willing to pay more for the service than the one offered by the NFL. That's why ESPN+ recently signed agreements with Wimbledon, La Liga, and an expanded agreement with the NHL to include an off-market broadcast package. For Disney and ESPN, an abundance of niche content may be better than just having content that is moderately appealing to everyone. 

The same can be said for Disney+ and Hulu. They offer more in-depth content in niche areas than any network or movie. That's the genius of series like "The Mandalorian” and "Loki," and Disney has content that will fill niches for just about everyone. 

For niche content to work in streaming, it's important to have a base of subscribers who can pay for a wide variety of content. These subscribers provide an influx of money, so more content can be purchased, which will lead to more subscribers and so on. Disney is one of the few streaming content companies with a large enough subscriber base to make a big step in content development. 

The closing reason Disney is just beginning to unlock its potential is that the company is in the early stages of developing a direct-to-consumer business model. Some analysts call Disney's business a waterfall, with movies driving DVD sales, online content, and, eventually, theme park sales. They all work together. 

What better way to improve each of these businesses than through direct customer relationships? With Disney+ subscriptions, Disney now knows what customers like to watch and what their kids are watching, which not only informs future content but can also lead to marketing for theme park trips or cruises in the future. And this level of detail would not be possible without streaming directly to the consumer. 

Disney has lost $4.5 billion over the past year due to pandemic-related shutdowns, so investors are not yet seeing the company's potential realized. You can see below that Disney grew quickly before the pandemic and after the launch of Disney+, and that growth may continue after the reopening. 

Despite the short-term losses, Disney is well-positioned to operate in the new media world, where companies can reach consumers directly, and Disney can market different types of content, such as sports, movies, and TV shows. 

While the price is below 183.00, follow the recommendations below:

• Time frame: D1
• Recommendation: short position
• Entry point: 176.75
• Take Profit 1: 164.70
• Take Profit 2: 160.80

Alternative scenario:

If the level 183.00 is broken-out, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 183.00
• Take Profit 1: 189.90
• Take Profit 2: 194.20