4 Key Takeaways From Disney's Q2 Print

Walt Disney Co DIS reported fiscal second-quarter earnings Tuesday that reinforce the bullish case for owning the stock, according to Morgan Stanley.

The Analyst

Morgan Stanley's Benjamin Swinburne maintained an Overweight rating on Disney's stock with an unchanged $130 price target.

The Thesis

Swinburne named four major takeaways from Disney's fiscal Q2 report in a Wednesday note. (See the analyst's track record here.) 

They are: 

• The company's parks and film segment saw its operating income rise 6 percent, "well ahead" of the analyst's already above-consensus forecast of a 4-5 percent drop. Encouragingly, upside from films came from higher-than-expected revenue in TV/SVOD/Other driven by international sales and the free TV window for "Star Wars: The Force Awakens."
• Total cable and broadcast affiliate revenue rose 5.2 percent in the quarter, which exceeded the 4.5 percent the analyst was expecting. While overall subscriber erosion continued in the quarter and was down 3 percent from one year ago, the ramp of virtual MVPDs helped offset traditional losses.
• Disney's commentary on its performance so far in the fiscal third quarter was mixed, as ESPN ad sales are pacing down 1 percent — but there is room for improvement due to the NBA playoffs, the analyst said. Similarly, parks resort reservations are pacing down 4 percent but booked rates are pacing up by 8 percent.
• Disney continues to build its direct-to-consumer platform in 2019, and the recent launch of ESPN+ and incremental tech spending on BAMTech shows the company's commitment to grow all of its products strategically, according to Morgan Stanley. 

Price Action

Disney shares were trading lower by 2.2 percent Wednesday morning at $99.50. 

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