Walt Disney Co DIS stock is trading slightly higher Friday after the company reported better-than-expected third-quarter earnings and revenue. Disney said its studio segment revenue was up 50 percent compared to a year ago ahead of the late 2019 launch of its Disney+ streaming service.
The stock was up about 3 percent to $119.49 at time of publication. Analysts remain mixed on Disney in the long-term and see the company entering a critical year following its buyout of Twenty-First Century Fox Inc FOXA FOX and ahead of its streaming service experiment.
Here’s a sampling of what some analysts had to say about Disney following the report.
Streaming Is King
Credit Suisse analyst Douglas Mitchelson said Disney investors should be prepared for a major investment year in 2019.
“Overall, the key for Disney’s stock once estimates have settled out will be how successful investors expect the Disney+ OTT streaming service will be,” Mitchelson wrote.
Morgan Stanley analyst Benjamin Swinburne said Disney once again executed well in its core business segments.
“With F4Q results ahead of estimates driven by Studio and content licensing, the Fox transaction likely closing earlier than expected, and an April investor day planned to lay out specific plans for Disney's streaming ambitions, we reiterate our bullish outlook for shares,” Swinburne wrote.
Tigress Financial analyst Ivan Feinseth said Disney will use its massive trove of content to beat Netflix, Inc. NFLX at its own game.
“I believe at some point they will out-Netflix Netflix,” Feinseth said on CNBC.
ESPN Stabilizing
Bank of America analyst Jessica Reif said Studio and Media Networks were the strong points, including a fifth consecutive quarter of improving ESPN subscriber trends.
“With a leading IP portfolio that is poised to expand via pending M&A, we believe DIS is best positioned to monetize in streaming (ESPN+ has 1mn subs, DIS+ will now incl. FOXA’s Nat. Geo. and FX/Fox will likely supply Hulu),” Reif wrote.
UBS analyst John Hodulik said ESPN seems to have stabilized for the time being.
“ESPN ad revenues declined 6% in F4Q (vs UBSe -5%) but are pacing up in F1Q19 benefiting from timing of CFC semi-finals (NFL ratings have been strong QTD),” Hodulik wrote.
Problems Persist
Pivotal Research Group analyst Brian Wieser said the strong third quarter doesn’t change the handful of long-term concerns for Disney.
“Comments provided by management around upcoming periods reinforced our concerns on the drivers of valuation in our model,” Wieser wrote.
Financial Times global media editor Matthew Garrahan said Disney deserves a lot of credit for the success of its studio business given the historical difficulty of the movie industry.
“The next question is what do they do with streaming...The big question is do they have enough content and will their tech work effectively enough to go global with a service that has a big impact,” Garrahan said in an interview with CNBC.
Winview executive chairman Tim Rogers said Disney has a major opportunity to be an early mover in legalized sports gambling, but because of its branding may miss out on the boom.
“They’re going to inherit through the Fox acquisition about 10 percent of Draft Kings, but my prediction is Disney, because of the Disney brand, is not a first-in mover [in gambling],” Rogers said in an interview with CNBC.
Ratings And Price Targets
- Credit Suisse has a Neutral rating and $114 target.
- Morgan Stanley has an Overweight rating and $135 target.
- Bank of America has a Buy rating and $144 target.
- UBS has a Buy rating and $128 target.
- Pivotal has a Sell rating and $95 target.
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