For a company exposed to many of the areas hardest hit by the pandemic, Walt Disney Co. Shares have been held up well, largely thanks to the company’s progress in streaming video and optimism about a possible reopening.
As the company’s operations are slowly showing signs of improvement, including a surprise profit in Thursday afternoon’s earnings report amid smaller-than-expected losses in theme parks and streaming, analysts are debating how to reflect that momentum in the stock.
Shares DIS,
are down 0.8% during Friday afternoon trading, reversing an earlier gain of a whopping 1.5% on an intraday high of $ 193.85.
Bernstein’s Mark Shmulik called his note to customers, “How often can investors get paid for the same thing?” He argued that Disney stocks, which are up 33% in the past year, are already appreciating the potential of streaming and an economic recovery, regardless of risk.
Shmulik said investors appear to value Disney +, the company’s streaming service, for more than 50% of Netflix Inc.’s NFLX.
enterprise value, even though Disney + has one-third of the subscriber base and half the average revenue per user (ARPU).
“Of course the market is forward-looking,” he wrote. But even if you think Disney will ‘catch up’ on Netflix subscriptions and ARPU, there is still significant time and risk for which shareholders will have to be compensated (not to mention the negative free cash flow between now and then). ”
Shmulik has a market performance rating on Disney’s stock. He raised his price target from $ 116 to $ 124, but the new target is still well below Disney’s recent price above $ 189.
MoffettNathanson analyst Michael Nathanson sees a mixed bag at Disney, including troubled old television networks, a fast-growing streaming company, and a bucket of parks and footage with the potential for recovery as the COVID-19 crisis improves. He wrote that Wall Street’s “hugely optimistic view” of the Disney + business had pushed stocks back to a new record on Thursday, despite challenges facing other areas of business and mixed streaming data points.
While Nathanson was impressed to see Disney show greater leverage in its direct-to-consumer business, growing $ 644 million in profits on $ 1.5 billion in revenue growth, he also said the market was too much focused seems to be growing Disney subscribers at the expense of revenue trends. He estimates that Disney sees 45% to 50% of its increasing subscriber growth from its Disney + Hotstar service in India, which generates much lower revenue per user than the regular Disney + service in the US.
“For a segment where investors use multiples of price to revenue to value assets, we think these variations on mix and [revenue per user] should come back into the picture at some point, ”he wrote, reiterating a neutral rating on stocks and lowering his target price from $ 180 to $ 175.
Others were more optimistic about the Disney story, including Macquarie analyst Tim Nollen, who emphasized that Disney’s “decent” earnings were better than expected due to less than expected losses in the direct-to-consumer and parks business.
“We believe the success of DTC and effective cost management have prepared Disney well for a profit recovery, and a reopening of parks and cinemas should deliver a cyclical recovery to 2H’21,” he wrote, while outperforming. and maintains a target price of $ 210. the stock.
Rosenblatt Securities analyst Bernie McTernan wrote that while Disney is “benefiting from stay-at-home and reopening themes,” he was struck by the progress made in the park business during the most recent quarter. “Parks recovered faster than expected,” McTernan wrote, given the “increased” demand in the holiday season.
“The risk points to the positive as it achieves profitability from previous levels earlier than expected (FY’23),” he wrote of the Parks, Experiences and Products segment. McTernan sees “in the long run if Disney can regain its pre-pandemic trajectory by generating higher ROIC [return on invested capital] trends from better revenue management ”, including through a strategy that uses prices to facilitate consumer demand.
He has a buy rating on the stock and has raised his target price from $ 210 to $ 220.
“While the Covid-19 pandemic has taken its toll on DIS’s legacy business (theme parks, film, media networks), we see a potentially significant benefit in releasing pent-up demand for widespread vaccine availability,” CFRA- analyst Aaron Siegel said in raising his price target from $ 190 to $ 220.
Disney shares are up 37% in the past three months as the Dow Jones Industrial Average DJIA,
is up about 7%.