Wall Street Doesn’t Understand That Walt Disney Co (DIS) Is the Best Long-Term Play in the Space, Says Wells Fargo

Thanks to a built-in marketing machine, the analyst believes new DIS streaming service will benefit.


Just how “misunderstood” is Walt Disney Co (NYSE:DIS) by investors on the Street who have seen the stock stumble almost 6% in 2017? Though the House of Mouse outclassed expectations in its third quarter earnings and is set to introduce a new streaming service by the end of 2019, choosing to pull content from Netflix down the line, this entertainment giant has hit a slump. In fact, some voices might be concerned by the multi-hundred-million dollar “hole” gaping in Disney’s eventual departure from Netflix.

Wells Fargo analyst Marci Ryvicker keeps gambling that this player is one that is valuable for the long game, and as such, the analyst maintains an Outperform rating on DIS stock with a price target of $116, which represents a close to 18% increase from where the shares last closed. (To watch Ryvicker’s track record, click here)

Juxtaposing the giant with World Wrestling Entertainment, the analyst argues that much like this platform, Disney also offers various channels to advertise its streaming service- all without having to dole out too many expenses, thanks to Disney Channel, parks and hotels, and films. Ryvicker highlights: “We’d note WWE has minimal promotional costs as all marketing is done on the weekly shows. Third, the $300MM ‘hole’ left by NFLX is not happening in one year – it will be spread over F’19 and F’20, so the impact to estimates will actually be a bit muted as ESPN and Disney apps ramp. Fourth, while there will likely be an impact on home entertainment revenue – i.e. licensing, DVD sales, EST (electronic sell-through) – this does not happen overnight and is NOT likely to go to $0 in the near-term as there will still be a part of the global population that wants to ‘own’ certain titles. We’d also highlight WWE here – while WWE did see home entertainment revenue drop by 50% when the WWE Network launched in 2015, it has sort of leveled off since then – it is not going to $0.”

Ultimately, “We continue to believe DIS is the best long-term play in the space,” wagers the analyst.

Cautious optimism circles the House of Mouse in terms of Wall Street’s vote, as TipRanks analytics exhibit DIS as a Buy. Based on 17 analysts polled by TipRanks in the last 3 months, 9 rate a Buy on Walt Disney stock, 6 maintain a Hold, while 2 issue a Sell on the stock. The 12-month average price target stands at $112.13, marking a nearly 14% upside from where the stock is currently trading.