Disney Analysts Boost Stock Prices Based On Strength of Disney+
If you’ve been following along with MickeyBlog then you know that yesterday The Walt Disney Company revealed its earnings for the 4th quarters. Though it was a mixed bag, as The Hollywood Reporter points out, the success of the Disney+ streaming network was one of the bright spots. So much so that after the markets closed yesterday, Wall Street analysts are giving the company credit how well the streaming network performed.
Fast-forward to this morning and several Disney analysts have raised their stock price targets for Disney as a result of the fact that Disney+ has managed to reach 73.7 million subscribers over the past 11 months. This was a target that the company hadn’t expected to reach until 2024.
According to the piece in THR, Tim Nollen gave an “outperform” rating on the stock raising his target price from $140 to $160 a share due to a “higher relative” value on Disney’s direct-to-consumer business.
Dan Salmon from BMO Capital Markets similarly boosted his price by $15 to $165. In a report Salmon wrote, “We knew it was early when we made Disney [our] top pick as COVID first emerged, but our thesis is playing out.” He continued, “Management delivered on the promise for parks re-openings to be incremental margin positive, while streaming subscriber trends remain strong, with Disney+ again sailing past our estimate (73.7 million versus our 62.5 million). Our direct-to-consumer value is now $100 as Disney has shifted faster than expected.”
The forecast continues to look good for the stock with Salmon saying, “18 trading days until the December 10th investor day: we recommend building positions ahead [of] an event that will likely lay out the path to one day take that value even higher.” He now forecasts Disney+ to reach 137.3 million subscribers in 2024, up from his previous estimate of 119.4 million.
Meanwhile, Guggenheim analyst Michael Morris boosted his Disney stock price target by $25 to $165 and maintained his “buy” rating saying that he “exceeded our/consensus expectations driven by outperformance at the media networks, parks, and direct-to-consumer segments.”
He also touted the “strong growth” across the firm’s streaming portfolio, including “over 120 million combined paid subs including ESPN+ and Hulu,” explaining: “We value the company’s direct-to-consumer businesses at five times estimated 2024 sales, with our multiple on the company’s SVOD products consistent with our valuation approach for Netflix.”
MoffettNathanson’s Michael Nathanson, who has a “neutral” rating on Disney shares with a price target that he raised by $3 to $139, shared a different view. “Even the most bearish Disney analyst has to admit that the ramp of Disney+ from zero to 73.7 million subscribers in less than a year is a magnificent and thesis-changing accomplishment,” he wrote. “As long-time believers in the magical qualities of Disney’s brands, content and execution, the launch of this service exceeded our wildest imaginations.”
But he also emphasized: “We are unwilling to take the leap of faith on direct-to-consumer valuation that the market is so willing to make because we are uncertain that the sum of Disney’s DTC businesses should be treated using Netflix’s multiples, which we still think is overvalued.” Concluded Nathanson: “Even if we try to employ a sum-of-the-parts multiple to capture the many moving parts of the story, we still have trouble seeing the risk-reward at this price at this point.”
Cowen’s Doug Creutz reiterated his “market perform” rating, but boosted his price target for Disney’s stock by $12 to $115.
“Disney+ is off to a very strong start, which we believe is the key variable governing stock performance,” he wrote. But he noted that management forecast streaming operating income to decline by about $100 million in the current quarter “driven by continued investment in Disney+, partially offset by improved results at both ESPN+ and Hulu.”
Concluded Creutz: “DTC sub trends remain positive, though fiscal first-quarter guidance suggests continued significant ramp in spending.”
In early Friday trading, Disney’s stock was up 3.3 percent at $139.95.
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