Walt Disney Co: A Content King Poised to Become a “Legitimate Streaming Player,” Cheers Daniel Ives

On the heels of Disney's FQ1 show, GBH Insights' Daniel Ives sees promising strides forward for the House of Mouse into the streaming arena.

Walt Disney Co (NYSE:DIS) shares flew almost 3% in after-hours trading last night after the House of Mouse delivered an earnings beat- even if the company did not quite meet revenue expectations for its first fiscal quarter of 2018.

GBH Insights analyst Daniel Ives is out with a first glance at the entertainment giant’s quarterly show, calling the performance “solid,” even if revenue was a “mixed bag.”

On the whole, the company revealed a “better than feared” print, thanks to a better-than-anticipated bottom-line turnout. Now, the Fox acquisition will be taking centerstage, a move Ives cheers as a “home run deal” despite its expensive cost. With Fox under Disney’s belt, coupled with a new streaming service poised to kickstart by next year, the “content king” has paved “a clear runway to gain market and mind share from the likes of Netflix.”

In reaction, the analyst reiterates an Attractive rating on DIS stock with a $120 price target, which implies a 13% upside from current levels. (To watch Ives’ track record, click here)

For the first fiscal quarter of 2018, Disney posted $15.35 billion in total revenues, underperforming the Street’s $15.48 billion estimate. Yet, the company fared far stronger on pro forma EPS, delivering $1.89 against the Street’s $1.61.

Media and Networks revenue hit $6.24 billion for the quarter, aligning more or less with the Street’s $6.35 billion, and Cable of $4.49 billion likewise just under the Street’s $4.53 billion. However, Parks and Resorts revenue was robust, soaring to $5.15 billion, and beating out the Street’s $4.86 billion. The analyst believes it was “somewhat expected,” so he remains unfazed that Studio revenue of $2.50 billion and Consumer/Interactive of $1.45 billion came up a bit short of consensus expectations.

Ives believes, “This quarter fundamentals take a back seat as the major focus around Disney & Iger will be the Fox acquisition, streaming endeavors, and the launch of a streaming ESPN service announced along with earnings which the Street will loudly applaud.”

Yet, the show-stealer of the evening from the analyst’s perspective points to a revealed ESPN Plus- the company’s first $4.99 per month direct to consumer offering. This rings as “music to the ears of investors that have long awaited for this strategic move,” asserts the analyst, concluding on a bullish note: “This over the top service will roll out in the spring and we believe this was a ‘no brainer’ move for Iger to launch this and further capitalize on its flagship ESPN franchise. With this service having massive amounts of sports content, it’s the perfect foray into streaming in our opinion with Disney’s standalone service coming down the pike slated for 2019, with the Fox acquisition and Hulu ownership making the company a legitimate streaming player.”

TipRanks showcases a largely optimistic analyst consensus betting on the entertainment empire. Out of 15 analysts polled in the last 3 months, 9 are bullish on Disney stock, 5 remain sidelines, and just 1 is bearish on the stock. With a health return potential of 12%, the stock’s consensus target price stands at $119.40.

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