Why BofA Remains A Disney Bull Despite Disappointing Q4 Outlook

Walt Disney Co DIS guided to global net additions of low-single-digit millions for Disney+ in the fiscal fourth quarter, lower than the Street expectations of around 10 million. However, this does not impact the long-term total subscriber estimates, according to BofA Securities.

The Walt Disney Analyst: Jessica Reif Ehrlich reiterated a Buy rating for Disney, while keeping the price target unchanged at $223.

The Walt Disney Thesis: Although the near-term projections are disappointing, the headwinds impacting Disney+ appear transitory and does not affect Disney’s long-term underlying fundamentals, Reif Ehrlich said in the note to clients.

The analyst mentioned three reasons for the company’s disappointing guidance for global net adds:

• A slower ramp in subscribers in the Latin American region, following the launch of Star Plus.
• Tough comps in India, with annual subscriptions not in an auto-renew mode in the country.
• COVID-19 pandemic-related production delays across the globe

“While not ideal, it is worth noting that Disney+ Hotstar subs are significantly lower ARPU subs and the headwinds in India imply that Disney+ core net adds accelerated vs. F3Q,” Reif Ehrlich wrote.

“In theme parks, DIS saw a modest slowdown at the end of August from the COVID delta variant, but noted that demand has recovered nicely following Labor Day,” she added.

DIS Price Action: Shares of Disney had risen by 0.99% to $172.84 at the time of publication Wednesday.

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