Should Disney shut down ABC? Needham's Martin answers

Investing.com -- Disney should consider shutting down its ABC broadcast network rather than selling it, according to Needham&Company, which argues the move could unlock long-term value despite a near-term hit.

“Given Disney’s negative share price performance based on recent FCC comments, we argue that Disney should shut down (not sell) ABC,” Needham analyst Laura Martin wrote.

She said the broadcaster represents “delays, distractions and headaches of regulation” that are increasingly costly in a world where “GenAI collapses time frames.”

Needham estimated that shuttering ABC would force Disney to write off $10 billion to $11 billion, or about 5 percent of its $204 billion market value.

However, the firm believes Wall Street would “add back this write-off, because ABC would be accounted for as a discontinued operation.”

Without ABC’s declining revenues, Needham forecasts Disney’s annual growth rate would rise by 40 to 60 basis points over the next decade, lifting its valuation multiple.

“Together, these would add $20 billion, (ie, 10%), of incremental value to Disney shareholders,” the note said.

Martin also highlighted ABC’s waning audience. The network averages about 2.4 million primetime viewers, with a median age of 58.

“Since the most valuable ad segments are under 49, much of ABC’s network reach has zero or low ad revenue tied to it,” she wrote.

Instead, Needham recommends that Disney simulcast ABC content on Hulu, which has a younger audience and operates outside federal broadcast rules.

Disney shares closed at $112.56 on Monday. Needham rates the stock a Buy with a $125 price target.

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