Morgan Stanley Previews Disney's Analyst Day, Says Consumers Have Strong Interest In Streaming Platform

Walt Disney Co DIS is hosting an investor day presentation Thursday, and Morgan Stanley says the "show is about to begin."

The Analyst

Morgan Stanley's Benjamin Swinburne maintains an Overweight rating on Walt Disney with an unchanged $135 price target.

The Thesis

Disney is expected to better explain its Disney Plus streaming video product and its plans for Hulu, Swinburne said in a Monday note.

Some of the details that would be appreciated include pricing, market launch timing, device support and the content pipeline, the analyst said. Financial terms are also expected, including the impact from lost licensing deals and original content spending, he said. 

Morgan Stanley's "AlphaWise survey" of U.S. consumers points to strong interest in Disney's streaming platform, Swinburne said. Close to 40 percent of U.S. consumers expressed "some level of interest" if Disney prices its platform at $8 a month, the analyst said. 

Assuming 100 million households have a broadband connection, this translates to more than 40 million subscribers in the U.S. alone, he said. 

A more reasonable estimate assumes that Disney ends 2020 with 5 million subscribers and 30 million subscribers by the end of 2024, Swinburne said.

In addition to a strong outlook for the Disney platform, the company's stake in Hulu remains "to some extent under the radar," he said. On a standalone basis, Hulu can hit the breakeven point by 2023 from growing subscriber scale and advertising growth, in Morgan Stanley's view. 

The research firm's $135 price target is based on 16 times pro forma adjusted "core" EPS and doesn't assign any value to the streaming business. A bull case $165 upside scenario is based on a market multiple of around 16 times "core" adjusted fiscal 2020 EPS of $9 plus $30 billion for the streaming business.

Price Action

Disney shares were up by 1.56 percent at $116.75 at the time of publication Tuesday. 

Related Links:

Cowen Upgrades Disney, Bullish On Streaming Service And Movie Pipeline

Imperial Capital Remains A Disney Bull Following Fox Closure