Disney Upgraded to Buy at Deutsche on Streaming Strength

“Disney is succeeding in the land-grab phase of direct-to-consumer," Deutsche Bank analyst Bryan Kraft said, upgrading the stock to buy.
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Walt Disney  (DIS) - Get Report shares rose on Tuesday after Deutsche Bank analyst Bryan Kraft raised his rating on the entertainment group to buy from hold and lifted his share-price target to $163 from $128.

He’s impressed with the company’s video-streaming efforts.

“Disney is succeeding in the land-grab phase of direct-to-consumer and has the most clear path to successfully transitioning its general entertainment programming and content production businesses into a globally scaled, vertically integrated streaming entertainment leader,” Kraft wrote in a commentary.

“The clearest sign that Disney is succeeding in transitioning its business model, aside from the impressive subscriber results, has been management's decision to shut down some of its traditional networks in international markets, including the U.K., and write down the associate goodwill: a sign of confidence that direct-to-consumer will more than offset lost network revenue.”

“Scaling direct-to-consumer in this land-grab phase of the industry is key to success for Disney because it will drive significant opportunities to monetize a large subscriber base in a more meaningful way down the road,” Kraft said.

He said that will happen through three dynamics. 

They're “(a) higher pricing, (b) leveraging the Disney+ base to distribute the soon-to-be-launched Star branded streaming service, and (c) an inevitable shattering of today's exclusive theatrical window to make room for new premium video-on- demand windows that enhance monetization of film studio output and add consumer utility to the Disney+ service,” Kraft said.

Walt Disney shares recently traded at $134.96, up 2.3%. They have eased 8% so far this year.