Walt Disney Co DIS reported third-quarter earnings and analysts have shared their thoughts and updated guidance.
The Disney Analysts: Morgan Stanley analyst Benjamin Swinburne reiterates an Overweight rating and $210 price target.
Wells Fargo analyst Steven Cahall has an Overweight rating and raises the price target from $209 to $216.
Needham analyst Laura Martin has a Hold rating and no price target.
KeyBanc analyst Brandon Nispel reiterates an Overweight rating and $225 price target.
On Streaming: Disney’s streaming subscription figures topped analysts’ estimates while also seeing a lower average revenue per user.
Swinburne highlights the growth of international streaming customers with new market launches in Malaysia and Thailand that happened in the quarter. In 2022, Disney+ will launch in Japan, Taiwan, South Korea and Hong Kong.
Cahall said Disney+ "subs came in ahead of expectations for a pretty strong beat in what was supposed to be a wash quarter,” calling the DTC momentum “undaunted.”
Concerns over international growth were lowered with Disney+Hotstar representing 40% of subscribers for Disney+.
“Disney+Hotstar was called out as consistent net additions quarter-over-quarter, which to us continues to imply growth in both the U.S. and ROW,” Nispel wrote in a note.
On Theme Parks: Disney’s Parks and Experiences segment reported revenue that was around two-thirds the level of the third quarter of 2019 despite capacity limitations and no cruise operations.
“The story of F3Q earnings is really at the Parks, Experiences and Products segment, which over the long-term we expect to return to the consistent double digit grower it was pre-COVID,” Swinburne wrote in a note.
The analyst notes the U.S. parks business broke even in the third quarter and had higher per capita spending than the 2019 third-quarter levels.
“We expect the recovery to continue even with some incremental delta variant risk,” Cahall said, noting confidence in the Parks segment recovering is growing.
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What’s Next: Martin is less bullish on Disney with new concerns of COVID-19 hurting the recovery efforts across several business units.
“Another year of unclear earnings contributions from theme parks, ESPN and film releases as vaccines roll out slowly globally,” Martin said.
The analyst worries that attendance for theme parks, cruise ships and theaters may not return to pre-COIVD levels that is currently being anticipated. She notes that consensus estimates are too high given the near-term risks.
“While the Delta variant represents new near-term risk, a strong U.S. consumer is expected to last into 2022 and Disney’s strength in IP and investment in tech at Parks reinforce our confidence in this important earnings driver,” Swinburne said.
Cahall is updating estimates and raising the price target based on earnings per share growth and a higher valuation closer to streaming giant Netflix Inc NFLX.
“With lots of acquisition content set to arrive in the next 18 months and Parks getting back to its stride, we see scope for stronger DIS ownership and higher estimates,” Cahall said.
Nispel says Disney warrants a premium valuation as a leader in the streaming market and a recovery of its Parks business.
DIS Price Action: Disney shares are up 1.7% to $182.45 at publication time.
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