For a company exposed to many of the areas most affected by the pandemic, Walt Disney Co. has seen its actions hold up well, thanks in large part to the company’s progress in video streaming and optimism about a possible reopening.
Now, with the company’s business slowly showing signs of improvement, including a surprise profit on Thursday afternoon’s earnings report amid lower-than-expected losses at theme parks and broadcasts, analysts are debating how it should to reflect this impetus in actions.
Share DIS,
they were down 0.8% on Friday at noon trading, investing a previous gain of up to 1.5% at an intraday high of $ 193.85.
Bernstein’s Mark Shmulik headlined his note to clients: “How many times can investors be paid for the same?” He argued that Disney shares, which have risen 33% over the past year, already have a price of streaming opportunities and an economic recovery, regardless of risk.
Shmulik said investors appear to value Disney +, the company’s streaming service, in addition to 50% of Netflix Inc.’s NFLX.
business value, even though Disney + has a third of the subscriber base and half of the average revenue per user (ARPU).
“Of course, the market is futuristic,” he wrote. “But even if Disney is believed to“ recover ”the Netflix and ARPU subs, there is still significant time and risk for shareholders to be compensated for (not to mention the negative free cash flow from now on. then) “.
Shmulik has a market valuation in Disney shares. It raised its target price to $ 124, from $ 116, but the new target is still well below Disney’s recent price above $ 189.
Moffett Nathanson analyst Michael Nathanson sees a mixed bag at Disney, including troubled inherited TV channels, a growing streaming business and a stockpile of film parks and resources with potential for recovery as the crisis improves of COVID-19. He wrote that Wall Street’s “massively optimistic view” of the Disney + business had raised equities to an all-time high since Thursday, despite challenges for other business areas and mixed data points within the transmission.
While Nathanson was impressed to see Disney show an increase in leverage in its direct consumer business, with improved profits of $ 644 million for revenue growth of $ 1.5 billion, he also said that the market seems too focused on the growth of Disney subscribers, at the expense of revenue trends. It estimates that Disney sees 45% to 50% of its incremental growth in Disney + Hotstar service subscribers in India, which generates much lower revenue per user than the regular Disney + service in the United States.
“For a segment where investors use a price to earn multiple income to value assets, we believe that these variations in combination and [revenue per user] it should refocus at some point, ”he wrote, reiterating a neutral rating of the shares and lowering its price target from $ 175 to $ 175.
Others were more optimistic about Disney’s history, including Macquarie analyst Tim Nollen, who highlighted Disney’s “decent” gains driven by lighter-than-expected losses to direct consumer companies. in the parks.
“We believe the DTC’s success and cost-effective management set Disney well for revenue recovery, and the reopening of parks and movie theaters should produce a cyclical rebound in 2H’21,” he wrote, all maintaining a higher rating and a target price of $ 210 in stock.
Rosenblatt Securities analyst Bernie McTernan wrote that while Disney “benefits from staying home and reopening themes,” he is surprised by the parks ’business advances during the most recent quarter. “Parks bounced faster than expected,” McTernan wrote, given the “high” demand for the holiday season.
“Risk points to the upside to reach earlier-than-expected profitability levels (FY’23),” he wrote about the parks, experiences and products segment. McTernan sees “long-term upside if Disney can regain pre-pandemic trajectory to achieve higher ROIC [return on invested capital] trends in greater performance management, ”even through a strategy that uses pricing to help soften consumer demand.
It has a stock purchase valuation and raised its target price to $ 220, from $ 210.
“Although the Covid-19 pandemic has taken its toll on businesses inherited from DIS (theme parks, movies, media networks), we see a potentially considerable rise in a new release of accumulated demand over widespread availability of vaccines, ”CFRA analyst Aaron Siegel said as he raised his price target to $ 220 ($ 190).
Disney shares have gained 37% in the past three months, as the DIA Jones Industrial Average DJIA,
has increased by about 7%.