Walt Disney Co.'s (DIS) - Get Report outlook is bright, according to analysts at Morgan Stanley who have a higher-than-average overweight rating on the stock, compared to an in-line rating for the rest of the industry.
The firm's optimistic outlook and $135 price target isn't helping the stock Thursday, however, as Disney shares fell 0.5% to $110.55 by the close of the trading session.
"2019 is likely a transformational year for Disney. Stepping back from the complexity, it will exit the year in a different place than it begins. Significant investments in content, theme parks, and M&A weigh on near-term earnings, but should set up the business for long-term growth," Morgan Stanley analyst Benjamin Swinburne wrote Thursday.
Morgan Stanley identified four major events in 2019 that will help the Action Alerts PLUS holding maximize its potential.
Those events include closing the acquisition of Twenty-First Century Fox Inc.'s (FOXA) - Get Report assets, which is expected to happen in the first quarter; the April investor day and expected launch of the Disney Plus streaming service that is expected to coincide with it; the opening of Star Wars Land in Orlando in the fall; and three multichannel video programming distribution renewals for ESPN and ABC in the fall.
"With DIS shares essentially flat since mid 2015, when cord-cutting reached a level to impact ESPN, a successful 2019 can reestablish Disney as a growth company for the future," Swinburne said. "Disney is building content assets that enable it to take advantage of the significant OTT opportunity ahead. ESPN's core distribution revenue growth can also see acceleration over the next few years, with potential for further positive earnings revisions from upcoming distributor renewals."