Disney's 'Uncertain Future': 3 Analysts Size Up Q2 Earnings, Future Plans For Disney+ And Hulu In Streaming Market

Media giant The Walt Disney Company DIS reported second-quarter financial results Wednesday that saw revenue come in ahead of analysts’ estimates. The company also reported a decline in subscribers for its Disney+ streaming platform. Here's an overview of analyst perspectives on the earnings report and the streaming platform.

The Disney Analysts: Morgan Stanley analyst Benjamin Swinburne has an Overweight rating and a price target of $120.

Truist analyst Matthew Thornton has a Buy rating and a price target of $121.

Needham analyst Laura Martin has a Hold rating and no price target.

Related Link: Trading Strategies For Disney Stock After Q2 Earnings 

The Disney Takeaways: Swinburne said Disney’s parks segment continues to “roll on,” while the media division undergoes changes.

“Disney is in the early stages of restructuring its Media businesses, taking significant cost out and revisiting its content monetization strategy. Fortunately, it is buttressed by continued Parks strength which along with valuable brands and franchises can bridge it to this uncertain future,” Swinburne said.

The analyst revises full-year estimates, but remains confident in the strength of the parks business and the prioritization of the media business moving forward.

“For Disney’s Media segment, the challenges are familiar to investors in the space as streaming growth is stagnating and linear pressures are accelerating.”

Swinburne said Disney’s announcement to move to a single app for Disney+ and Hulu likely means the company will be buying the 33% of Hulu it does not currently own from Comcast Corporation CMCSA next year.

Other key announcements for Disney+ were plans to raise U.S. prices later this year and introduce an ad-supported tier in Europe, Swinburne added.

Thornton said the financial results were consistent with expectations from analysts.

The positives for Thornton from the earnings report were free cash flow, cost savings and a price increase coming to Disney+. The negatives highlighted by the analyst were subscriber declines at Disney+ and parks growth slowing.

“Disney aims to increase the price gap between SVOD and AVOD, with more sub growth to come from AVOD (accretive), with SVOD revenue growth to come more from price,” Thornton said.

Thornton said that adding Hulu content to Disney+ could benefit engagement, retention and advertising.

“We think this sets the stage for an eventual consolidation of the apps (assuming DIS acquires the remaining stake in Hulu) with implications for cost savings.”

Martin maintains a Hold rating on Disney and shared several key takeaways from the financial results.

“DIS believes it has a strong ad tech stack with best in class digital data, and it is already providing state-of-the-art programmatic and addressable ad tools to their Hulu advertisers,” Martin said.

The analyst said this could benefit Disney+ advertisers if it integrates Hulu and Disney+ into a single app in the future and buys out the remaining Hulu stake from Comcast.

On the ongoing battle between Disney and Florida Gov. Ron DeSantis, Martin said the “political drama is now in the courts.”

“DIS feels strongly that it has the better arguments, and that it will win in court.”

Martin said consensus estimates for Disney are too high, given the higher investment needed for direct-to-consumer before profitability and weak earnings from the linear TV and box office segments.

“Longer-term, we believe DIS’s asset mix of both digital and physical assets maximizes its economic value capture.”

DIS Price Action: Disney shares are down 8.2% to $92.77 on Thursday.

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