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.
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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.
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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