Walt Disney Company (The) (NYSE: DIS), Netflix, Inc. (NASDAQ: NFLX) – Why four analysts think Disney can thrive now and after the pandemic

The Walt Disney Company (NYSE: DIS) broke expectations for the second quarter on Thursday due to the strong growth of its streaming service Disney +.

What happenedDisney reported $ 16.25 billion in revenue, well above the Street estimate of $ 15.93 billion, while the adjusted EPS delivered a 32 cent loss, beating the Street estimate of a 41 cent loss. The company has managed to do this despite the fact that the parks and cruise ships have closed completely or opened at reduced capacity as a result of the COVID-19 pandemic.

Disney’s biggest growth has been the number of streaming subscriptions. The company reported that it had brought in 95 million Disney + subscribers this quarter and now has more than 146 million paid subscribers. This quarter is the first since the company ended its free trial.

CFO Christine McCarthy said executives are “very happy with the conversion numbers we’ve seen here, from the promotion to becoming paid subscribers.” McCarthy also said during the conference call that the company “has also set that goal for more than 100 new titles each year. And that’s in Disney Animation, Disney Live Action, Pixar, Marvel, Star Wars, Nat Geo. And of course we will continue to add more to our library over time, ”demonstrating the company’s growth plan in this area.

The Disney Analysts: Goldman Sachs analyst Brett Feldman reiterated a buy rating, raising the price target from $ 211 to $ 225.

Needham analyst Laura Martin repeated a hold rating.

Morgan Stanley analyst Benjamin Swinburne reiterated an overweight rating and a price target of $ 200.

Rosenblatt Securities analyst Bernie McTernan repeated a buy review and raised his price target from $ 210 to $ 220.

Strong growth in streaming, movies and park revenue: Feldman of Goldman Sachs sees strong growth in 2021 due to demand in two main areas. First, of its streaming services, which he says will bring in more revenue when Disney increases subscription prices in February and March. Feldman also pointed to the potential customer acquisition of Disney’s planned release of two Marvel movies this spring.

Second, Feldman believes park revenues will increase as pent-up demand to visit Disney theme parks picks up. Feldman said Disney’s “core businesses remain well positioned for a rapid recovery as the economy reopens.”

Why Disney Can Surpass Netflix: Needham’s Martin said Disney is valued at only half of what Netflix Inc. (NASDAQ: NFLX) is even though Disney beats Netflix in its only game.

Martin said Disney trumps Netflix for better marketing skills, stronger titles, and the ability to draw on subsidiaries, such as Lucas Films and Marvel, to cut costs. Martin, like McTernan and Feldman, sees Disney benefit from the reopening of the economy in 2021, which she says is not the case for Netflix.

Recover for a long time, but the worst is over: Morgan Stanley’s Swinburne said that “while the road to recovery remains long and uncertain,” he believes the worst is over and expects revenue streams from Disney’s parks and cruises to continue to recover in 2021.

Swinburne also noted that Disney expects Hong Kong to reopen in the second quarter and pointed to better-than-expected retail sales in Disney stores for “Star Wars,” “Frozen 2,” and “The Mandalorian” merchandise. Swinburne also said that Disney’s direct-to-consumer business is exceeding expectations, and that Disney + will likely pass 100 million subscribers soon.

Growing streaming services: Rosenblatt’s McTernan said Disney has been able to take advantage of both stay-at-home and reopening themes across the company by expanding its streaming services, while also beating amusement park revenue expectations despite the pandemic. More conservative: McTernan doesn’t see park revenues return to pre-pandemic levels until 2023, but noted that this could be earlier depending on the success of the vaccine rollout.

DIS Price promotion: Shares of Walt Disney Co fell 1.70% to $ 187.67 at the end of Friday.

Photo by Ella de Kross on Unsplash.