Disney Stock Bucks Market, Setting Another New High After Investor Day Bonanza

Business

Disney shares are once again in record territory, bucking an overall selloff in the markets to rise 14% to north of $176. Trading volume is more than three times its normal level.

The investor euphoria follows the company’s long-anticipated investor day. The Thursday afternoon event stretched into the evening Thursday, featuring plugs for 100 new film and TV titles coming to Disney+ as well as projections for 230 million to 260 million Disney+ subscribers by 2024. The stock had already been on a tear coming into Thursday evening’s extravaganza.

Analysts expressed their admiration for Disney’s feat of producing a sequel to the company’s bravura investor day in April 2019, when it fully persuaded Wall Street and the media of its streaming ambition. The company’s stock jumped 10% to a then-record $130 after that event, when the pricing and plan for Disney+ were revealed.

“It turns out that the second act of the Disney Investor Show was just as good as the first,” MoffettNathanson’s Michael Nathanson wrote in a research note. “While we expected to hear about Disney’s accelerated content investment in their DTC businesses, the sheer size and quality of the content tsunami headed to Disney+ was mind-blowing and frightening to any sub-scale company thinking about competing in the scripted entertainment space.”

Nathanson maintained his “neutral” rating on the stock but boosted his 12-month price target by $21 to $160.

In an even more upbeat note titled “To Infinity and Beyond,” Morgan Stanley’s Benjamin Swinburne reaffirmed his “overweight” rating on Disney, with a price target of $175.

Swinburne said if Disney meets its goals of attracting 300 million-plus streaming subscribers and pulling in $35 billion in revenue, it will “complete a transformation of the company and open up additional opportunities over time.” Disney, he continued “is a 100-year-old company that has always distributed and monetized its content primarily through third parties.” Not anymore.

Bernstein Research analyst Todd Juenger is a little more mixed on Disney’s prospects of catching up to Netflix, which leads the field with 195 million global subscribers and a presence in 200-plus global territories. In a note, Juenger said the company’s sharp increase in subscriber guidance “exceeds the bar, for sure, but not as wildly as the headline number sounds.”

Juenger rates Disney “market perform” with a target of $116.

Doug Mitchelson of Cowen & Co. also has a “market perform” (neutral) rating on Disney, with a $115 price target. He noted one key takeaway from the presentation: While Disney boosted its guidance for subscribers and content spending, it did not move forward its anticipated timeline for when all of this investment will start to return a profit: fiscal 2024. “It’s not clear how this leads to an improved long-term outlook for earnings power,” Mitchelson cautioned in a note.

Also, Mitchelson pointed out that a traditional company like Disney must rob Peter to pay Paul.

“Moreover, the higher expectations go forDisney+ and other DTC services five years out, the more linear profit contributions are likely to be in jeopardy,” he wrote.

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