Disney Initiated With Buy Rating and $137 Price Target at Goldman Sachs

Disney is well-positioned to pivot into direct-to-consumer video models, Goldman Sachs says.
Publish date:

Disney  (DIS) - Get Report is well-positioned to pivot into direct-to-consumer video models, a Goldman Sachs analyst said Monday as he initiated coverage of the entertainment giant with a buy rating and a $137 price target.

Shares of the Burbank-based media kingpin were up slightly to $119.55 in early trading on Monday.

Analyst Brett Feldman wrote in a note that he believes the market is underestimating the potential of Disney+, Disney's recently-launched direct to consumer (DTC) streaming service. 

"We believe Disney's best-in-class brand, global distribution (breadth), production assets (build), sizable content library (backlist) and strong financial profile (balance sheet) position the company to build scaled DTC video platforms in the highly competitive streaming environment," Feldman said.

Feldman said that stay-at home measures in the United States to slow the spread of the coronavirus "have driven a boom in streaming."

The analyst said he estimates there will be over 150 million Disney+ customers by late-2025, "which could prove conservative as it would represent only 22% of our estimated global addressable market of 712 million."

"We also estimate that Disney+ will become profitable in F2021," Feldmans said, "two years faster than consensus (F2023) based on our view that as Disney+ approaches Netflix-like scale it will approach Netflix-like economics." 

Disney+ has racked up more than 54 million subscribers in eight months and positioned itself as the top rival to Netflix  (NFLX.)  

Downloads for the Disney+ app jumped 74% in the U.S. during the July Fourth holiday weekend as the smash Broadway musical "Hamilton" launched on Disney+.

In addition, Feldman said he believed Disney's theme parks and theatrical releases will be do well post-Covid-19, and that investors don't fully appreciate the synergies between these segments and Disney+.

Disney reopened Walt Disney World in Florida on Saturday after closing the theme park in March, complete with safety precautions such as temperature checks.

On Sunday, Florida reported 15,000 cases of the coronavirus, the highest single-day total of known cases in any state since the start of the pandemic.

Disney is a holding in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells DIS? Learn more now.