Disney’s latest earnings report and conference call revealed a mixed bag of progress, challenges, and new initiatives. While CEO Bob Iger is making strides in terms of cost-cutting and moving towards streaming profitability, the company is also facing difficulties in its linear TV networks business. Additionally, Disney plans to roll out a Disney+ ad tier abroad and crack down on streaming account sharing, adopting strategies similar to those of Netflix.
The reaction from Wall Street was a mix of caution and optimism. Bank of America analyst Jessica Reif Ehrlich expressed optimism in a Thursday report, reiterating her “buy” rating and $135 stock price target. She highlighted management’s forecasts of exceeding cost-cutting targets and accelerating Disney+ subscriber net additions in the current fiscal fourth quarter. Reif Ehrlich praised CEO Bob Iger’s ability to navigate the company through the transition period and believed that consensus forecasts would likely be biased to the upside.
However, MoffettNathanson analyst Michael Nathanson emphasized the near-term challenges facing Disney. He maintained an “outperform” rating on Disney shares but lowered his price target to $115. Nathanson pointed out the decline in profits in Disney’s Media and Entertainment Distribution business due to the shift into streaming distribution and post-pandemic headwinds. He also raised questions about the profitability of Disney’s legacy film and TV studios given the changes in the industry.
Nathanson also discussed the possibility of asset sales or spin-offs that Iger has mentioned. He suggested creating a new company, combining Disney’s Parks, Experiences and Products segment with Disney+ and the studio IP. This new company would likely trade at a higher valuation due to its strong revenue growth and iconic assets. The remaining assets would be housed in a separate entity.
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Wells Fargo analyst Steven Cahall maintained an “overweight” rating on Disney shares but reduced his price target to $146. He highlighted the various adaptations Disney is making, including cost cuts, price increases, content shake-ups, and portfolio shaping. Cahall believed that these changes could be the turning point for Disney. He also compared Disney’s streaming performance to Netflix, noting that Disney now has 77.5 million unique subscribers in the U.S. and Canada, on par with Netflix.
Looking ahead, Cahall outlined key investor questions and debates that could be addressed in a planned investor event in September. These include improving content, the outlook for streaming, potential portfolio changes, and factors related to ESPN’s direct-to-consumer transition.
CFRA Research analyst Kenneth Leon reaffirmed his “buy” rating on Disney’s stock but lowered his price target to $105. He highlighted the value of Disney’s distinct assets and the potential for strategic realignment and spin-offs. However, he adjusted his earnings estimates for fiscal years 2023 and 2024, leading to the reduction in his price target.
Guggenheim analyst Michael Morris maintained his “buy” rating and $125 price target, citing the parks beat offsetting media softness in the fiscal third-quarter revenue. He also noted that cost discipline at Disney’s direct-to-consumer division drove a segment operating income beat. Morris adjusted his fiscal fourth-quarter segment operating income estimate and Disney+ core subscriber net additions forecast.
Macquarie analyst Tim Nollen maintained a “neutral” rating and $94 price target on Disney shares. He noted that while there were some new developments, such as price increases on Disney+ and new ad tier launches, there wasn’t much change to the overall numbers.
In conclusion, Disney’s latest earnings report and conference call drew mixed reactions from analysts. While some expressed optimism in the company’s strategic transformation and progress towards streaming profitability, others highlighted the challenges and uncertainties in its linear TV networks business and legacy film and TV studios. Wall Street will continue to closely monitor Disney’s initiatives and progress as the company navigates the evolving media landscape.
