Update with closing price, more analyst comments. Disney shares, which set an all-time record ahead of Thursday’s quarterly earnings report, are down 2% today even as many analysts express optimistic views about the media giant’s prospects.
The company’s first-quarter fiscal year results beat analysts’ expectations despite $ 2.6 billion in theme parks damaged by Covid-19 and a 28% drop in ARPU influx, or average revenue per subscriber. The Disney + growth story, which reached 94.9 million global subscribers by the end of the second quarter of January, drove the stock for months as investors increased the bonus on the company’s axis.
Shares in Disney closed at $ 187.56, double the average volume. The highest point came earlier in the week at $ 193.83.
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One well-established analyst in the ascension camp is John Hoodolic of UBS, who raised the stock to “buy” last month. In a note to clients Thursday night, he repeated his positive review, with a 12-month price target of $ 200. He noted the progress made in broadcasting, which he expects to continue with the launch of the company’s Star-brand service in Latin America and Europe later this year. “Meanwhile, vaccine progression, is pent-up
The cost efficiency brought about by demand and the pandemic is making the park sector make a strong recovery in fiscal year 2022 and record profits in fiscal year 2023, he wrote in a note to clients.
Morgan Stanley’s Ben Swinburne reaffirmed his “overweight” (buyout) rating for Disney stocks, with a target of $ 200 as well. Likewise, the results convinced him at the Parks Unit. He wrote of Parks in a research note: “While the road to recovery remains long and uncertain, the worst appears to be behind and the underlying demand / operating leverage is encouraging.”
Swinburne said that even the company’s linear networking business, overshadowed by the flow, has had its “first clean quarter” since the ACC network launched in August 2019. Operating income there was $ 600 million better than estimates, mostly due to lower expenses. (CFO Christine McCarthy has warned analysts against advocating that spending on sports rights could accumulate in unusual ways in the coming quarters due to the effects of Covid-19 on the sports landscape.)
These positive reviews are typical. Only one company on Wall Street, BMO Capital Markets, has downgraded Disney shares in the past several months, despite the heavy losses from the coronavirus pandemic.
However, few analysts remain on the sidelines. Michael Nathanson of Moffett Nathanson maintains a “neutral” rating on the company’s shares. On a note to customers, it lowered its 12-month target price by $ 5 to $ 175 based on the earnings report. He said the company could be considered made of three distinct “mice”. The ‘Old Gray Mouse’ runs a low linear grid business but still generates criticism; The “recovering mouse” has theme parks and content processes hit by the Covid-19 virus but are starting to recover; The DTC Mouse is registering steady growth for broadcast subscribers.
Nathanson noted that Wall Street took a “very optimistic view” of Disney’s live streaming business, but that the per-user revenue results were below his expectations and gave him some pause. At the same time, he said, “Local parks’ revenue for this quarter was materially better than we thought due to strong attendance and individual spending. We believe that recovering Parks is not a matter of if, but when.”
Bernstein Research’s Todd Ewinger repeated the “market performance” rating, but raised its target price (although not too high at $ 124), mainly because he sees less risk of recession. But he is upset at the impression that Disney is nearing the same level as Netflix when it comes to live broadcasting. “Of course the market looks to the future,” Ewinger wrote in a note. “But even if one thinks Disney will” catch up “with Netflix and ARPU subscribers, there is still significant time and risk for shareholders to compensate (not to mention the negative free cash flow now and then).
Doug Kreutz of Quinn & Co., who also has a “market performance” rating at Disney, believes that “Accounting The mechanics here are a bit vague. ” Due to changes in the corporate structure. Disney recently created two large divisions of its company: Media and Entertainment Distribution and Parks and Experiences and Products. In Kreutz’s view, Disney could be more inclusive and straightforward in reconciling the new structure with the previous financial direction.
The analyst also issued a cautionary note about Parks despite an optimistic outlook from CEO Bob Tangle, who echoed government expectations that by April, all Americans who want a vaccine will be able to get it. By 2022, no one attending the Disney park will need to wear a mask, the CEO predicted during the earnings call.
As the spread of Covid-19 accelerates during the holiday period, we are I expected Parks to remain under severe pressure during at least the first half of the fiscal year, “Kreutz wrote in a research note.While vaccines are being rolled out, the situation is still very flexible with new variants Of the virus is showing some resistance to the current vaccines. “