Disney Jumps on Streaming Success: What Wall Street's Saying

Here's what Wall Street analysts were saying about Disney's quarter.
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Shares of Disney  (DIS) - Get Report jumped close to 10% Wednesday morning after the company reported mixed fiscal third quarter results but strong streaming service demand. 

The closure of the company's theme parks, falling ad revenue and the lack of theatrical releases for its studio arm all weighed on the entertainment giant. 

Despite that it was able to report revenue of $11.78 billion, a 42% drop year-over-year, while its diluted earnings fell 94% to 8 cents per share. Analysts were expecting a loss of 64 cents per share and revenue of $12.4 billion, according to FactSet. But it also reported strong subscriber growth for its streaming services, noting that it now had more than 100 million subscribers across its multiple services. 

Here's what analysts are saying:

BMO Capital (Outperform rating unchanged, PT raised from $140 to $150)

"We continue to expect net positive re-opening data points to drive outperformance over the next 12 months, supported by fresh long-term targets for the DTC streaming business, where we see COVID-19 driving an acceleration of adoption and rationalization of the competitive environment. DIS remains our Top Pick, followed by NFLX."

-Daniel Salmon

JPMorgan (Top Idea, $135 PT unchanged)

"We are impressed with the robust growth of Disney+, reaching 60.5m subscribers as of 8/3. Disney’s early success in transitioning its business to a digital platform will likely award the stock a higher multiple as it increases conviction in its longer-term success and path to profitability. We see the hit from COVID-19 being specific to F2020 with some lingering impact to attendance at the Parks and some disruption in the slate of films as an issue that may bleed into F2021."

-Alexia Quadrani

Credit Suisse (Upgraded to Outperform from Neutral, PT raised from $116 to $146)

"Clearly, the key driver of sentiment will be Disney+ sub growth, especially with Europe/Latam launches soon, and mgmt’s analyst day details this fall (Disney+ ahead of plan perhaps funding much or all of Star streaming), along with COVID dynamics and Disney’s associated recovery path. Risks include reramping Hollywood production (needed to drive streaming), a COVID 'second wave,' disappointing streaming subs and linear networks declining sooner/faster than streaming grows.

-Douglas Mitchelson

Morgan Stanley (Overweight, $135 PT reiterated)

"Out of both success (Disney Plus) and necessity (COVID-19 disruption), Disney is moving to push its streaming strategy to new levels of investment and growth. Execution in both content and technology will remain keys to share outperformance, but we like its hand. After reaching over 100mm DTC subscribers across its three major streaming services at the end of F3Q, Disney has announced two major new steps towards a more substantial DTC business with 1) Premiere Access and 2) a global Hotstar."

-Benjamin Swinburne

Guggenheim (Buy rating unchanged, PT raised from $123 to $140)

"Disney management delivered a focused message of boldly pursuing additional global streaming video opportunities by leveraging STAR and Disney+ assets and a premium VOD window. While numerous uncertainties around COVID-related pressures on parks and theaters and cord-cutting pressure on media nets remain, the announcement of an upcoming investor day to deliver a 'full update of…(digital) guidance' will likely punctuate another sentiment tailwind. Using Disney assets to accelerate a push into DTC will likely be well received by investors."

-Michael Morris

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