Morgan Stanley Sees Disney Suffer From Confidence Crisis; Cuts Price Target By 12%

Two analysts lowered price targets on The Walt Disney Co DIS but maintained the rating.

• Morgan Stanley analyst Benjamin Swinburne lowered the price target to $185 from $210 (23% upside) and kept an Overweight. 
• Swinburne raised his expectations for streaming investment levels and reduced the earnings outlook at linear networks as costs return and at the studio as theaters remain under pandemic attendance pressure. 
• Swinburne has lowered his adjusted operating income forecast by roughly 10%-15% and is now forecasting $6-$7 of FY24 EPS and expecting minimal free cash flow in FY22 given a ramp in content production and higher parks capex. 
• However, he thinks Disney shares "suffer from a crisis of confidence" and have overreacted, leaving him seeing over 20% upside in shares from here, adds Swinburne. 
• He forecasts Disney Plus adds roughly 25 million "core" subscribers in FY22, up from approximately 21 million in FY21.
• Macquarie analyst Tim Nollen lowered the price target to $185 from $195 and kept an Outperform, telling investors that he is more cautious on network media as the "streaming wars go global." 
• Looking ahead to 2022, he favors ad agencies over media networks, arguing that the ad market is strong and agency stocks tend to perform well in early rate tightening cycles.
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• Price Action: DIS shares traded lower by 1.21% at $148.75 in the premarket session on the last check Tuesday.