Barclays Upgrades Disney On Streaming Service Optimism

The next year will be a critical time for Walt Disney Co DIS and its investors as the company attempts to make a major pivot to streaming video. While there’s still plenty of uncertainty surrounding Disney’s upcoming streaming service launch, one Wall Street analyst saye the risk for investors is currently to the upside.

The Analyst

Barclays analyst Kannan Venkateshwar upgraded Disney from Equal-Weight to Overweight and raised his price target from $104 to $130.

The Thesis

Disney is on the verge of entering the “story” phase of its streaming rollout, where headlines will likely influence the stock price more than data. In the past, Venkateshwar said Disney has received the benefit of the doubt during similar phases due to its long-term track record of execution, and he expects Disney will get similar treatment this time as well.

Venkateshwar said investors may soon get more clarity on the outlook for some of the more difficult parts of Disney’s business, such as ESPN. Venkateshwar said Disney’s next Investor Day event, which has not yet been scheduled, could be a bullish catalyst for the stock.

“We acknowledge that we might be a bit early on this call given that Investor Day details haven’t been announced yet but we believe that the risk of substantial downside from even more bearish current expectations is limited,” Venkateshwar wrote in the note.

At the same time, Disney will undoubtedly need to make massive investments to launch and scale-up its streaming service. Those investments will take a significant bite out of the company’s near-term earning potential.