Disney Gains as Wall Street Embraces Bob Iger's Streaming Ambitions

(Bloomberg) -- Walt Disney Co.’s most recent earnings gave investors some insight into growth prospects for 2019 as Chief Executive Officer Bob Iger sets the table for a future with at least three streaming platforms.

With management now offering a more precise time-frame for the 21st Century Fox Inc. deal to close, Wall Street is cheering the Burbank, California-based media giant’s fourth-quarter report given the top-line beat. Shares of the company climbed 3.4 percent as of 10:26 a.m. New York time, the biggest intraday jump since July.

Disney Gains as Wall Street Embraces Bob Iger's Streaming Ambitions

Here’s what analysts are saying:

Needham, Laura Martin

Martin says Disney answered a “key outstanding question,” noting that it will run its new direct-to-consumer streaming service alongside Hulu and ESPN+.

The new service -- called Disney+ -- will launch in the second half of 2019 and include the Disney and Fox studios’ deep film and television libraries.

Hold rating, no price target

Barclays, Kannan Venkateshwar

While Disney’s fiscal fourth-quarter results were better than consensus on the top line, “investor focus was more on other factors given the pending Fox deal and OTT service launch,” Venkateshwar wrote in a note to clients.

Disney announced plans to host an investor day in April and, according to the Barclays analyst, “we expect this to be a material catalyst for the stock, especially if the company provides enough details around investment needs of the service to de-risk estimates.”

The company faces tough comps and cost step-ups in the first quarter, with management indicating the studio segment is confronting a $600 million operating income headwind due to comp with “Star Wars,” “Thor” and “Coco.”

Overweight, price target $130

Credit Suisse, Douglas Mitchelson

“We expect Fox might close in January along with its issuance of $37b of stock to Fox shareholders,” Mitchelson wrote. “Overall, the key for Disney’s stock once estimates have settled out will be how successful investors expect the Disney+ OTT streaming service will be.”

Mitchelson says ESPN subscriber trends improved for the fifth quarter in a row and management talked up growth at Hulu Inc. and YouTube, important for Disney as for all of media.

Neutral, price target $114

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