BofA Is Bullish On Disney While MoffettNathanson Is A Tad Defensive - Read Why

Two analysts have different stances on The Walt Disney Co DIS.

With Disney's earnings in the rear-view mirror, BofA says that a rampaging recovery in the Parks unit combined with an upcoming ramp to significantly higher content output has Disney "firing on all cylinders" in its new fiscal year. Disney's parks division, in particular, is encouraging for multiple drivers, analyst Jessica Reif Ehrlich notes.

New features add to revenue growth, including its Genie+ replacement for FastPass and unique attractions like the Galactic Starcruiser and Ratatouille Adventure. And in time, it will be buoyed by the return of international visitors (who make up some 20% of total visitors) and cruise ships (with new ships coming on line in fiscal 2022, 2024, and 2025).

On content, there's "finally" a ramp-up coming in the second half of 2022, with Disney+ launching in 42 new countries and 11 new territories covering 70 million broadband households this summer. 

And a long-term contributor to 2024 guidance will come from the new plans for an ad-supported tier of Disney+. With "a period of strong earnings growth" ahead, BofA has maintained its Buy and $191 price target, implying a 42% upside.

MoffettNathanson analyst Michael Nathanson lowered the price target to $150 from $165 (12.4% upside) and kept a Neutral. 

The analyst updated his "long-run steady-state" Disney direct-to-consumer margins and streaming revenue and EBITDA comp multiples using Netflix Inc's NFLX current share price and valuation multiple, giving Disney a 10% premium to the market. 

Nathanson estimates Disney's steady-state streaming margins will be in the mid-teens versus prior assumptions of Netflix's current operating income margins of nearly 20%. The market appears to be moving past rewarding media companies to forecast future streaming subscriber growth.

Price Action: DIS shares closed lower by 5.13% at $133.50 on Monday.

Photo by Anthony Quintano via Flickr