Disney Stock Rises on Analysts' Upgrades, Focus on Digital Opportunity Ahead

Bob Chapek attends the grand opening of Guardians of The Galaxy attraction 2017- Getty-H 2019
Richard Harbaugh/Disneyland Resort via Getty Images

"Disney management delivered a focused message of boldly pursuing additional global streaming video opportunities," writes one Wall Street observer, upgrading the stock from "neutral" to "buy."

Wall Street analysts covering Walt Disney on Wednesday focused on the future digital upside for the Hollywood giant instead of the near-term financial pain caused by the novel coronavirus pandemic, with several raising their stock price targets for the company and two upgrading the stock. 

Guggenheim Securities analyst Michael Morris, who raised his stock rating from "neutral" to "buy" rating on the stock, boosted his price target to $140 from $123. "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," he told investors.

And Credit Suisse's Douglas Mitchelson upgraded the stock from "neutral" to "outperform" and boosted his price target from $116 to $146. "With new CEO Mr. Bob Chapek now indicating an 'innovative and bold' further pivot to streaming, we expect Disney shares to be even more aggressively positioned as a streaming growth story (where investors have limited
investment vehicles), and eventual COVID recovery play," he argued.

Meanwhile, Bernstein analyst Todd Juenger raised his Disney target stock price to $116 from $105, while maintaining his "market perform" rating, in a report he called "A New Direct-to-Consumer Dream." And BMO Capital Markets' Daniel Salmon pushed his price target from $140 to $150. In a report entitled "Reiterate Top Pick as the Shift to Direct-to-Consumer Streaming Accelerates," he concluded: "CEO [Bob] Chapek put his first stamp on Disney by doing exactly what long-term holders crave: pushing faster to streaming."

Morgan Stanley analyst Benjamin Swinburne in a report entitled "Direct-To-Consumer 2.0" also focused on Disney's continued drive into new digital business opportunities. "Out of both success (Disney+) and necessity (COVID-19 disruption), Disney is moving to push its streaming strategy to new levels of investment and growth," he wrote in reiterating his "overweight" rating on the stock. "Execution in both content and technology will remain keys to share outperformance, but we like its hand." 

Eyeing its "next leg of direct-to-consumer growth," he highlighted how the company, after reaching more than 100 million streaming subscribers across its three major services at the end of June, late Tuesday unveiled "two major new steps towards a more substantial direct-to-consumer business with 1) Premiere Access and 2) a global Hotstar."

Swinburne called Premiere Access, a pay-to-download part within Disney+ that is set to launch with pay-for access to Mulan, "an interesting example of Disney using its premium IP to drive its direct-to-consumer business and monetize its content in a window with more (or in this case, all) of the economics accruing to Disney versus a third party." He added: "It is an opportunity that is fairly unique to Disney, which is in the tentpole film business at a level other studios or streamers are not. It is unlikely it would have tested this opportunity with a tentpole release like Mulan if not for COVID's impact on moviegoing, but it is using this crisis to take risk and embrace the shifting consumer relationship."

Disney shared in early Wednesday rating rose 5.7 percent to $124.