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Disney's Quarter Is A Direct-To-Consumer Story, Says RBC Analyst

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Disney's Quarter Is A Direct-To-Consumer Story, Says RBC Analyst

Investors focusing on just the headline numbers in Walt Disney Co (NYSE: DIS)'s below-consensus third-quarter report may want to reconsider, according to RBC Capital Markets' Steven Cahall

The Analyst

RBC Capital Markets' Cahall discussed Disney's earnings as a guest on CNBC's "Squawk Box" segment Wednesday.

The Thesis

Disney investors focused on the EPS or income misses or other metrics — including subscriber growth, advertising revenue, and one-off writedowns at the Studios business — may be missing the bigger picture, Cahall said. (See the analyst's track record here.)

Disney's business continues to head down a direct-to-consumer path, which makes it appropriate to compare the stock to Netflix, Inc. (NASDAQ: NFLX)'s lofty valuation, he said. 

"The great thing about Netflix is that it is global and the great thing about Disney is it is global," Cahall said. "I don't think there is a lot of debate about the global nature of Disney's brands, so their ability to scale at that level — I think investors are willing to take the bet now."

Disney's stake in Hulu gives it a streaming video platform it can operate as a "separate but interlaced" entity, the analyst said. Many Disney fans who will only want a pure Disney streaming platform, but there are also many families that want a broader platform in Hulu, Cahall said, adding that the Mouse will cross-market the two platforms as much as possible.

Price Action

Disney shares were trading down 2.09 percent to $114.12 at the time of publication Wednesday. 

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Latest Ratings for DIS

DateFirmActionFromTo
Oct 2020MoffettNathansonMaintainsNeutral
Sep 2020Deutsche BankUpgradesHoldBuy
Aug 2020CitigroupMaintainsBuy

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