Shares reached as high as $130.31 during the session before finishing at $127.61, their highest closing price since February 25. Trading volume was more than three times its average level.
While Disney’s financial reality in the fiscal third quarter was fairly bleak, with heavy theme-park losses and significant erosion in pay-TV, streaming continues to be a beacon of hope. The company said it has drawn 60.5 million subscribers to Disney+ and also set the launch of an international streaming effort based around Star. Another bold stroke, billed as a “one-off” by CEO Bob Chapek, was putting Mulan on Disney+ for $30.
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Doug Mitchelson of Credit Suisse boosted shares to “outperform” from “neutral,” raising his 12-month price target to $146 from $116. In a note to clients, he wrote that Disney is now “even more aggressively positioned as a streaming growth story (where investors have limited investment vehicles), and eventual COVID recovery play.”
Guggenheim’s Michael Morris issued an upgrade to “buy,” lifting his price target to $140 from $123.
Chapek and his colleagues, Morris wrote, delivered a “focused message of boldly pursuing additional global streaming video opportunities by leveraging Star and Disney+ assets and a premium VOD window. While numerous uncertainties around COVID-related pressures on parks and theaters and cord-cutting pressure on media nets remain, the announcement of an upcoming investor day” is another tonic.
Chapek didn’t give a date for the event, but said the management team would set a time in the next few months to offer analysts a “full update” on their revised road map.
Todd Juenger of Bernstein Research, raised his price target to $116 but maintained his neutral rating on Disney shares. In a research note, he wrote, “We understand the theory. It’s a chance to re-play the 2019 playbook. Announce a new DTC. Hold an investor day. Announce 5-year sub, ARPU, and profitability target. Collect a ‘Netflix revenue multiple’ against that guidance priced into the stock.”
Juenger continued, “Before we get too carried away, hold on, this is not quite the same. Disney/Fox TV content is not consumer-distinguished in the same way as the Disney+ brands. There will be sizable required investments, we believe the biggest of which will be, once again, foregone licensing. Not to mention accelerated decline of international linear channels,” which produced a $5 billion writeoff in the quarter.
Michael Nathanson of MoffettNathanson, is also neutral on Disney stock but raised his price target $7 to $118. Like Juenger, he labeled the Star announcement a “surprise,” explaining in a note to clients that his assumption was that “the financial pain of this current crisis would make Disney more conservative in the near-term.”
Because competing in streaming requires a stream of pricey new programming, Nathanson added, “We assumed that Disney would maybe add some new, edgier content to Disney+ to drive up the perceived value of that service.”
Investors looking to time their buys of Disney ahead of the next investor day could see a windfall, as many did in 2019. “We would not be surprised to see the stock grind higher as anticipation builds,” Nathanson wrote.
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