Analyst Steven Cahall sees major growth ahead but is also leery of content costs and cord-cutting.
Disney's new streaming business, Disney+, could grow to 60 million subscribers by the end of 2020, placing the company on Wells Fargo's list of best growth stocks in media.
However, Cahall says if the consumer is hit with another recession, it could affect Disney parks, which have enjoyed "many years of healthy margin expansion." A "manageable" factor, he says, is the potentially "big pickup" in cord-cutting at Disney's ESPN and media:
We expect cord cutting for ESPN and media to continue to be a factor, but a manageable one. A bigger-than-forecast pickup in cord cutting could increase ecosystem tension and force programmers and [multichannel TV providers] to revisit how content is distributed. A la carte bundles are a risk to sports nets like ESPN.
Cahall's price target implies 30% upside from Disney's Monday closing price. The stock was trading up 0.7% to $133.43 Tuesday. The shares are up 24% year to date. Its dividend yield is 1.3%.
Based on 24 analysts polled by FactSet, the consensus is a buy rating and price target of $155.85, almost 6% above the top of its 52-week range between $100.35 and $147.15.