Disney shares tumble after earnings when an analyst asks, “How many times can investors get paid for the same thing?”

Disney predicts 'content tsunami' that should shake little streaming gamers, analyst says

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This update fixes the name of CFRA analyst Tuna Amobi. For a company exposed to many of the areas hardest hit by the pandemic, Walt Disney Co. has seen its actions hold up well, thanks in large part to the company’s progress in streaming video and optimism about an eventual reopening. .

Now that the company’s business is slowly showing signs of improvement, including a surprise profit in Thursday afternoon’s earnings report amid lower-than-expected losses at theme parks and streaming, analysts are debating how that momentum should be reflected. in stocks. DIS shares, -1.70% fell 1.7% in trading on Friday. Bernstein’s Mark Shmulik titled his note to clients: “How many times can investors be paid for the same thing?” He argued that Disney shares, which have risen 33% over the past year, already value transmission opportunities and economic recovery, regardless of risk. Shmulik said investors appear to be valuing Disney +, the company’s streaming service, at more than 50% of Netflix Inc.’s NFLX business value, -0.19%, although Disney + has a third of the subscriber base and half of the average revenue per user (ARPU). “Of course the market looks to the future,” he wrote. “But even if one believes that Disney will ‘catch up’ with Netflix subscribers and ARPU, there is still significant time and risk for which shareholders must be compensated (not to mention negative free cash flow between now and then) “. Shmulik has a market performance rating for Disney shares. It increased its price target from $ 116 to $ 124, but the new target is still well below Disney’s recent price above $ 189. MoffettNathanson analyst Michael Nathanson sees a mixed bag in Disney, including social media. Troubled legacy television, a fast-growing broadcast business, and an array of parks and movie assets with the potential for recovery as the COVID-19 crisis ameliorates. He wrote that Wall Street‘s “hugely optimistic view” of the Disney + business had pushed the stock to another all-time high through Thursday, despite challenges for other business areas and mixed data points within the broadcast. While Nathanson was impressed to see Disney show incremental leverage in its direct-to-consumer business, with profits improving by $ 644 million on revenue growth of $ 1.5 billion, he also said the market seems too focused on Disney’s subscriber growth, at the expense of revenue trends. He estimates that Disney sees 45% to 50% of its incremental subscriber growth from its Disney + Hotstar service in India, which generates much lower revenue per user than the regular Disney + service in the US. ” For a segment where investors use a price to generate multiple income to value assets, we believe that these variations in the mix and [revenue per user] would have to refocus at some point, ”he wrote, reiterating a neutral rating for the stock and lowering his price target to $ 175 from $ 180. Others were more optimistic about the Disney story, including the analyst from Macquarie Tim Nollen, who highlighted Disney’s “decent” earnings pace driven by smaller-than-anticipated losses in direct-to-consumer and parks businesses. “We believe that DTC’s success and effective cost management prepared Disney for an earnings recovery, and the reopening of parks and movie theaters should produce a cyclical rally in 2H’21,” he wrote, while maintaining a performance rating. higher and a $ 210 price target on the stock. Rosenblatt Securities analyst Bernie McTernan wrote that while Disney “benefits from the stay-at-home and reopening themes,” he was surprised by the progress seen in the parks business during the most recent quarter. “The parks recovered faster than expected,” McTernan wrote, given the “high” demand for the holiday season. “The risk points to the upside by reaching previous levels of profitability earlier than expected (fiscal year 23),” he wrote about the segment of parks, experiences and products. McTernan sees “long-term benefits if Disney can regain its pre-pandemic track record by driving higher ROIC [return on invested capital] trends towards better performance management, ”including through a strategy that uses pricing to help smooth consumer demand. He has a buy rating on the stock and raised his price target to $ 220 from $ 210. “While the Covid-19 pandemic has affected DIS’s legacy businesses (theme parks, movies, media networks), we see considerable upside potential in further release of pent-up demand on widespread vaccine availability,” analyst CFRA Tuna Amobi said by raising its price target to $ 220 from $ 190. Disney shares have gained 37% in the last three months as the Dow Jones Industrial Average DJIA, + 0.09% has risen about 7%.