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 for
Disney+ and other DTC services five years out, the more linear profit contributions are likely
to be in jeopardy,” he wrote.