Walt Disney Co. (DIS) shares jumped higher Friday after analysts at Barclays boosted their outlook on the stock to "overweight", with a $130 price target, amid the group's pending acquisition of 21st Century Fox (FOXA) and the launch of its global streaming service that is expected to challenge Netflix (NFLX) .
Barclays analyst Kannan Venkateshwa boosted his price target by $25 and said Disney will have a strong balance sheet and cost synergies following the $71.3 billion deal for Fox's media assets that bested rival Comcast Corp. (CMCSA) . He also noted that Disney could see "greater visibility" in business units such as its ESPN sports network, which costs are rising and customers are moving towards more 'a-la-carte' options.
Action Alerts PLUS holding Disney shares were marked 2.3% at the opening bell Friday and changing hands at $118.92 each, a move that extends the stock's year-to-date advance to around 11%.
Earlier this week, Morgan Stanley upped its price target by $5 to $135 per share, noting that Disney is trading at 15.3 times forward 12-month earnings, compared to an 85x forward P/E for Netflix, suggesting the stock provides much better value at current levels. It also estimated that its online streaming platform Hulu will generate around $4 billion in revenues over 2018.
The Action Alerts team wrote earlier this week that the recently launched ESPN+ DTC subscription service eclipsed 1 million paid subscribers back in September (see our Alert here), and strong viewership at the start of the NFL season is supportive of healthier trends. In total, we view Disney's growth initiatives as an underappreciated story in this market, and we like the value we get at current levels.
TheStreet's technical expert, Bruce Kamich, notes that while Disney's share price is "above the rising 50-day moving average line and the bullish 200-day line", a ""retest of the 50-day line could happen in this currently weak equity environment."
Still, Kamich notes, Disney could "stage a major move up from here" and "maybe a trade above $120 will do it. Stay tuned."