Disney's Strong Quarter Keeps Investors Happy, But Its 'Biggest Moment' Awaits

Walt Disney Co DIS reported fiscal fourth-quarter results that kept multiple Street analysts bullish on the stock.

The Analysts

Morgan Stanley analyst Benjamin Swinburne maintains an Overweight rating on Disney with a $160 price target.

UBS analyst John Hodulik maintains at Buy, $155 price target.

CFRA analyst Tuna Amobi maintains at Buy, price target lifted from $150 to $160.

Morgan Stanley: Strong Close To 2019

Disney ended fiscal 2019 on a positive not with adjusted EPS coming in better than expected. Swinburne's key highlights from the quarter:

  • Studio EBIT beat expectations despite lower than expected contributions from the acquisition of Fox assets.
  • ESPN Plus and Hulu subscribers continued to grow.
  • Subscriber pressure in the Media Networks were offset by strong ad sales and lower expenses.

On the other hand, attendance and per cap growth at parks fell short of expectations which may be due to consumers holding off visits ahead of the launch of new attractions.

Looking forward to next week's launch of Disney+, Morgan Stanley's proprietary AlphaWise survey points to an improvement in interest for the streaming platform. Specifically, consumer interest rose from 37% in February to 44% in September.

Related Link: Report: Disney's Streaming Library Is Not A Complete Catalog

UBS: DTC A Key Focus

Disney's direct-to-consumer and international (DTCI) segment lost $740 million in operating income in the reported quarter and management expects to lose another $800 million in the new quarter. Hodulik said the DTC business was a "major focus" of the conference call and management offered new details, including a new distribution partnership with Amazon.com, Inc. AMZN

Management reaffirmed its prior Disney+ guidance and discussed an initiative to include sports content at ABC.

"We continue to believe the success of DTC efforts will drive Disney shares," Hodulik wrote in a note.

CFRA: Premium Valuation

The case for turning incrementally bullish on Disney's stock is based its "very robust" franchise pipeline, Amobi said. The research firm's revised $160 price target is based on a premium valuation of 17.9 times EV/EBITDA on fiscal 2020 estimates.

MIDiA Research: 'Biggest Moment' For Disney

Disney's launch of its streaming service is days away and will mark the "biggest moment" for the company, Tim Mulligan, EVP and research director at MIDiA Research, said on CNBC. The launch of a streaming platform implies Disney is transitioning from a media company to a technology company.

Disney is also in a position to weaponize the "fandom relationship" it has, especially with kids, he said. Disney already made it clear it has a "proven" content library for young audience which serves as a unique way to stand out in the crowded streaming video market.

Price Action

Disney's stock traded higher by 4% to $138.42 at time of publication.

Posted In: Benjamin SwinburneCFRADisney PlusDisney+John HodulikMorgan Stanleystreaming videoTuna AmobiUBSAnalyst ColorEarningsLong IdeasNewsPrice TargetTop StoriesAnalyst RatingsTrading Ideas