Walt Disney Co. (DIS) - Get Report posted a solid earnings beat on Thursday after the close as its film division performed well and its theme park results came in largely in line. Shares were rising 4% to $138.27 on Friday morning.
All eyes are now on its Disney+ streaming service, scheduled to launch in the U.S. on Tuesday, with analysts largely optimistic about its prospects.
Here's what analysts were saying:
Morgan Stanley (Overweight, Price Target $160)
Less than a week away from the Disney Plus launch, Disney wrapped FY19 with adjusted EPS ahead of expectations led by the Studio and lower DTC losses, with Parks broadly in-line. Our updated AlphaWise survey points to increased consumer enthusiasm for Disney Plus, reiterate OW.
Our most recent AlphaWise consumer survey of US broadband households showed an uptick in interest in Disney Plus. Specifically, from our survey in February 2019 prior to the investor day and announced pricing, to September 2019, the % reporting interest in Disney Plus increased from 37% to 44%.
JP Morgan (Overweight, Price Target Kept at $150)
We are reiterating our Overweight rating following strong FQ4 results ahead of expectations. Disney is impressively balancing strong growth in its core business, the integration of 21CF, and the upcoming launch of its major DTC initiative...
We see long-term value in Disney's distinct brands and assets with high barriers to entry in multiple aspects of the business. While there is uncertainty in the broader media landscape and Disney's multiple direct-to-consumer initiatives, we believe Disney is in the best position to succeed given its unmatched arsenal of content, well-recognized global brand, and impressive marketing arm. We envision these services ultimately enhancing already robust growth in Disney's other businesses. After an impressive move post Disney's investor day on April 11, the stock has given a little back along with weakness in the overall media group. We find its current valuation an attractive entry point for the patient investor.
We maintain our December 2020 price target of $150 based on a forward valuation of ~24x, applied to our F21E adj. EPS of $6.20. Once data becomes available on subscriber growth we are likely to take a more comprehensive valuation approach weighted more heavily on a SOTP basis to better reflect the value of Disney's increasingly important DTC products. We see this valuation as reasonable as despite concerns around subscriber declines and content investment at the DTC initiatives, Disney is taking the right steps to position its business for the future and has a stable longer-term earnings/FCF growth outlook that distinguishes the profile of its business from its peers.
Credit Suisse(Outperform, Price Target Kept at $150)
Outlook: Key is obviously what level of success Disney+ has in the marketplace, starting with its launch next Tuesday in the U.S., Canada and the Netherlands, then New Zealand and Australia on November 19th, and then Western Europe March 31st - our F1Q subscriber estimate is 6.8m (total subs, not just paid subs) and for FYE'20 it is 15.5m. Secondarily, will investors consider reported EPS estimates to be derisked for FY20 in the low $5's, or to drive increased interest in Disney's core businesses will mgmt need to demonstrate Fox execution, reasonable ratings, cord cutting stabilizing, Film success and/or parks returning to attendance growth. Of note, management indicated it will begin to outline Hulu International strategy and market launches in 2020, while sports will likely stay a multiplatform strategy (ESPN/ABC/ESPN+) with more sports on ABC in the future (hinting, in our view, that Disney will go after a Sunday afternoon NFL package).
Valuation: At our $8 of CY20e "traditional" EPS, Disney trades at 16.5x P/E, vs. its historical premium valuation. Our target remains $150, with 16x traditional EPS plus $40b of value for streaming (2x CY23 revenue).
Barclays, Overweight, Price Target Maintained at $150
While there was some concern about Disney earnings going into the quarter, fiscal Q4 results came in 25% better than expected on operating income and better than guidance. The beat largely came from the Disney side while Fox underperformed vs our expectations. Disney outperformance was driven by Studio and Media networks coming in better than expected and losses at DTC being lower than expected. On the Fox side, the miss appears to have been driven by all the segments acquired by Disney.
There was some expectation going into the quarter about the company guiding the Street towards a core EPS number for 2020, but this did not bear out. The company provided guidance just one quarter out and based on this guidance, our operating income estimates have come down across all segments.
- Kannan Venkateshwar