Disney Gains After Results as Analysts Look Ahead to Streaming

(Bloomberg) -- Walt Disney Co. shares rallied for their biggest intraday gain in seven months Friday, after the media giant reported fourth-quarter results that beat expectations.

While the results were greeted warmly by Wall Street, most analysts are focused on the upcoming launch of the company’s Disney+ streaming-video service. The service “should take the wheel in determining the trajectory of the stock” from here, wrote Rosenblatt Securities, and optimism is growing over the company’s ability to add millions of subscribers early on.

MoffettNathanson wrote that “we might be underestimating the size of the first year of launch,” given launch dates for the service in Western Europe and the potential for more bundles like Disney recently announced with Verizon Communications. Bernstein wrote that the prospect of 20 million first-year subscribers looked “much more likely” given these trends.

Shares of the Dow component gained as much as 5.5% as the market opened in New York, to $140.25. Should the stock end the day with a gain of that magnitude, it would represent the biggest post-earnings rally since February 2015, according to Bloomberg data. The stock had gained about 21% thus far this year through Thursday’s close, compared with the 23% rise of the S&P 500.

Here’s what analysts are saying about the results:

Bernstein, Todd Juenger

Disney+ is launching in Western Europe “much earlier than we thought,” and along with the Verizon deal, “year one subs of 20mm look much more likely.”

The main question is how much can the company’s Core Parks business grow, if at all.

Market perform, price target raised by $1 to $131.

Rosenblatt Securities, Bernie McTernan

Disney cleared “the last and lowered hurdle before Disney+ launches.” From here, “Disney+ should take the wheel in determining the trajectory of the stock,” and it will likely be a positive for shares.

Subscriber declines for the company’s media networks accelerated more than expected, “highlighting the need” to focus on streaming.

Buy rating, $170 price target.

MoffettNathanson, Michael Nathanson

This quarter “just doesn’t matter,” given how inherently messy it was given the acquisition impact of Fox assets, the consolidation of Hulu, and the pivot to direct-to-customer video streaming.

Given the Western European launch dates for Disney+, as well as the potential for further telecom bundles, “we might be underestimating the size of the first year of launch.”

“The market is sensing big things are brewing in the quarters ahead,” and momentum in subscriber growth may become the “sole focus” for investors.

Buy rating, $150 price target.

Cowen, Doug Creutz

The results were “strong,” but the near-term model is “in flux” given recent changes and the upcoming Disney+ launch.

“We continue to believe that Disney+ is very well positioned to have an extremely strong launch that surpasses consensus subscriber expectations.”

Outperform rating, $154 price target.

What Bloomberg Intelligence Says:

“Disney+ investments and the Fox integration will keep near-term earnings under pressure,” although the Fox assets give it “heft in a streaming world and a deep content library for direct-to-consumer offerings.”

- Analyst Geetha Ranganathan

- Click here for the research

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Courtney Dentch

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