Disney Climbs; Credit Suisse Sees Pent-Up Demand, Cost Controls

Disney, set to report on Thursday, was affirmed outperform at Credit Suisse, which likes the outlook for the entertainment icon.
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Shares of Walt Disney  (DIS) - Get Report are rising Thursday as the entertainment icon, set to report on Thursday, was affirmed outperform at Credit Suisse.

Analysts at Credit Suisse are bullish on the company's outlook heading into the report while maintaining its $218 price target. 

Read More: Puke or Profit? How to Ride Disney After Earnings

At last check shares of Disney were 1% higher at $180. 

"Overall, we expect in-line fiscal-second-quarter results, but a favorable forward outlook, analyst Douglas Mitchelson wrote.

The factors include "pent-up parks/cruise ship demand and a structurally improved cost structure suggesting a return to parks profitability in the fiscal third quarter and returning to fiscal 2019’s [earnings before interest and taxes] level in fiscal 2022.

"Despite [the] shares consolidating this year, we remain bullish as [the company's] earnings power should be clarified."

Read More: Disney Higher as Truist Touts Global Position, Direct to Consumer

The investment firm also expects increases in average revenue per user from its streaming services and rebounding ad revenue coalescing into strong guidance for the next quarter. 

Nielsen U.S. data showed the Disney+ streaming service with a consistent 5% share of the TV-streaming market, according to Credit Suisse. The company hasn't suffered significant losses due to increased competition in the space. 

"Having 2 original Marvel shows ("Wanda," "Falcon") vs. "Mandalorian" in the fiscal first quarter was reasonable, as was carry-over viewing of "Soul," while we expect "Raya" [premium video on demand] saw reasonable take rates," Mitchelson said. 

"App downloads appeared healthy, cooling off from the seasonally strong calendar fourth quarter (which was also fueled by [Latin America] launches and part of the delayed [India Premier League] season), but still in line to slightly above calendar Q420-calendar Q3 2020."

Analysts surveyed by FactSet are expecting Disney to report second-quarter earnings of 26 cents a share on revenue of $15.86 billion. 

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