This Stock Is 'Only Asset We Want To Own' In Media, Analyst Says While Forecasting 40% Return For A Juggernaut

Zinger Key Points
  • Impact of Disney's reduced subscriber guidance is likely to be offset by higher pricing and improved content, KeyBanc analyst says
  • Disney is the only asset KeyBanc wants to own in Media

Walt Disney Co. DIS reported Wednesday after the close better-than-expected fiscal-year third-quarter results.

The Disney Analyst: Brandon Nispel maintained an Overweight rating on Disney shares and increased the price target from $131 to $154, suggesting about 37% upside from the current level.

The Disney Thesis: Disney’s results reflects strong performances by domestic parks and linear networks, while the direct-to-consumer business experienced losses, Nispel said in a note.

The better-than-expected streaming subscriber number of 221.1 million was due to strength in Hotstar and the international business, the analyst noted. Net adds of U.S., Hulu and ESPN+ were weaker than expected, he added.

The $3 per month price increase for the ad-free Disney+ subscription was higher than the $1 per month increase the company announced last year, Nispel said. An ad-supported Disney+ tier, priced at $7.99 per month, will launch on Dec. 8, the analyst noted.

See Also: How To Trade Disney Stock Following The Earnings Print

Nispel expects the negative impact of the company’s reduced fiscal year 2024 core Disney+ and Disney+ Hotstar subscriber guidance to be offset by the price increase and the continuing increased content being released on the service.

“We believe this is a positive trade-off,” he said.

Following the results, KeyBanc upped the fiscal year 2022 revenue and adjusted EBITDA estimates for Disney, citing expectations of higher revenue and EBITDA at linear networks and parks. The firm expects this to flow through to 2023.

“We continue to see DIS as the only asset we want to own in Media given the platform of DTC products, relatively strong linear brands, and ability to tie content and experiences together with Parks,” the firm said.

This should lead to revenue and operating income growth that is amongst the fastest in the firm’s coverage for the next several years, it added.

Disney Price Action: In premarket trading, Disney shares were rallying 7.62% to $121, according to Benzinga Pro data.

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Posted In: Analyst ColorEarningsEntertainmentNewsPrice TargetReiterationAnalyst RatingsMoversTrading IdeasGeneralBrandon NispelKeyBanc Capital Markets
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