“The Force Awakens,” “They Got the Beat” and “Quieting the Doubters.” Walt Disney’s latest quarterly earnings and streaming business updates drew praise from Wall Street analysts, who lauded signs of improved Disney+ subscriber momentum after disappointing results in the previous quarter.
Some observers also raised their stock price targets on Thursday, particularly due to increased financial estimates for non-streaming businesses, mainly theme parks. In early trading, the stock was up 5.4 percent at $155.24 despite a drop in the broader market.
During its fiscal first quarter, streaming service Disney+ added 11.8 million net subscribers to end the period — which included the launch of such originals as The Book of Boba Fett — with 129.8 million in total, the Hollywood giant said on Feb. 9. Its total direct-to-consumer user additions hit 17.5 million, crushing Wall Street expectations for a gain of 10.8 million. Disney ended the latest quarter with 196.4 million total streaming subscribers and re-affirmed its forecast that it would reach 230-260 million global streaming subscribers by the end of its fiscal year 2024.
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Macquarie analyst Tim Nollen reiterated his “outperform” rating on Disney’s stock, with a $185 price target, on Thursday in a report entitled “Quieting the doubters on subs,” in which he summarized: “Disney had a great quarter, led by Disney+ subs and parks.” And Nollen explained: “Investing in Disney shares means believing the streaming transition will succeed and enjoying the cyclical rebound at the parks; Disney is demonstrating its prowess in both areas.”
Wells Fargo analyst Steven Cahall, who has an “overweight” rating and $196 price target on Disney’s stock, entitled his report “The Force Awakens,” arguing: “Confidence in Disney+ awakens … The company is doing and saying all the right things to make fiscal year 2024 guidance, so it’s a content execution story from here.” While that means that Disney+ “is hardly out of the woods with a long way to fiscal year 2024 guidance,” he lauded the company for making the right moves in terms of “heavy content investments, rationality on sports rights, bundling etc.”
His conclusion: “We like the setup here for content success to drive the subs.” And Cahall emphasized that the stock of Disney, led by CEO Bob Chapek, is his team’s “top growth idea.”
CFRA Research analyst Tuna Amobi, who has a “buy” rating on Disney shares, was also bullish, maintaining his 12-month target price of $200 on them. He highlighted that this means a 22.6 times multiple on his enterprise value per estimated fiscal year 2023 earnings before interest, taxes, depreciation and amortization, “well above its peers and the five-year historical average of 20.7 times.”
Explained Amobi: “Disney’s significantly better-than-expected December quarter results showed a major rebound in its global streaming subscriber additions at Disney+ (11.7 million net adds), as well as ESPN+ and Hulu (4.2 million and 1.5 million). We see an even greater acceleration in [the] fiscal second half [of the current fiscal year ending in September] as Disney significantly ramps up the international rollout of Disney+ in tandem with an aggressive content push.”
BMO Capital Markets analyst Daniel Salmon noted an after-hours gain in Disney shares and spoke of a “deserved relief rally” after recent investor concerns about streaming subscriber momentum. He maintained his “market perform” rating on the stock, but boosted his price target by $10 to $175, reflecting higher financial estimates for the company’s non-streaming businesses.
“Disney stabilized the short-term narrative by outperforming on its most important metrics, especially Disney+ subs in the face of increased investor skepticism of the streaming model of late,” Salmon wrote. “Notwithstanding the after-hours bounce, we think shares are likely to remain range-bound as investors continue to seek a clearer path to how Disney/ESPN’s live sports business will shift to streaming.”
Guggenheim’s Michael Morris, who has a “neutral” rating on Disney, raised his stock price target by $7 to $172, noting: “Disney rebounded from a disappointing fiscal fourth quarter by beating (in the) first quarter where it mattered: streaming subscribers, parks trends and consolidated profitability.”
Cowen analyst Doug Creutz also increased his Disney stock price target, by $6 to $132, “on higher fully-recovered parks earnings before interest, taxes, depreciation and amortization estimates.” He reiterated his “market perform” rating on Disney.
Meanwhile, MoffettNathanson analyst Michael Nathanson — who has a “neutral” rating and $165 price target on Disney shares — touted the streaming upside surprise and particularly the strong theme parks performance in his report.
“When we reflect about the massive surprise that Disney delivered in the fiscal first quarter, we are primarily focused on the incredible beat in parks profits that came from the most amazing set of drivers that we have ever seen,” Nathanson wrote. “Consider this: from the September quarter to the December quarter, domestic park revenues increased by $1.33 billion, while domestic park profits increased by a nearly identical $1.31 billion. In other words, in a period of rising inflation, the domestic park business added zero incremental costs as revenues surged.”
