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Bullish Guggenheim Eyes Disney's Streaming Play, Core Business, Valuation

April 23, 2019 3:41 pm
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Walt Disney Co (NYSE:DIS) is among the most "complicated" companies in the media space, and the investment thesis is highlighted by three key questions, according to Guggenheim.

The Analyst

Michael Morris resumed coverage of Walt Disney with a Buy rating and $157 price target.

The Thesis

The first of three questions surrounding Disney's investment profile is related to the economic potential of Disney+ and other streaming platforms, Morris said in a Tuesday note. (See his track record here.) 

The company offered 2024 subscriber guidance that includes 60 to 90 million Disney+ subscribers, but the total addressable market and opportunity are likely larger than what management projects, the analyst said. 

Over the next 12 months, subscriber growth success will be vital to generating incremental investor optimism, Morris said. 

Aside from streaming video, investors are likely questioning how the core business will perform, the analyst said. Investors have reason to maintain a confident outlook in Disney's core studio business, along with parks and consumer products, he said.

On the other hand, an ongoing "uncertainty" toward the media business, home video and content licensing segments are warranted given secular headwinds and competition from within in the form of Disney's streaming platform, Morris said. 

What value will investors assign Disney given the concerns existing within the core business?

Consensus estimates may start to shift toward a two-part valuation model, the analyst said:

  • A market-based valuation to the core business (i.e excluding direct-to-consumer).
  • A separate valuation incorporating the long-term outlook for digital and international assets.

Price Action

Disney shares were up more than 1 percent at $133.08 at the time of publication Tuesday. 

Related Links:

Bank Of America Adds Disney To 'US 1' List, Lifts Price Target To $168

3 Reasons Imperial Capital Is More Bullish On Disney

Photo courtesy of Disney. 

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