Walt Disney Company (The) (NYSE: DIS), Netflix, Inc. (NASDAQ: NFLX) – Why 4 analysts think Disney can prosper now and after the pandemic

The Walt Disney Company (NYSE: DIS) exceeded second quarter expectations on Thursday due to strong growth in its Disney + streaming service.

What happened: Disney reported revenue of $ 16.25 billion, well above Street’s estimate of $ 15.93 billion, while adjusted EPS had a loss of 32 cents, exceeding Street’s estimate of a loss of 41 cents. The company achieved this despite having suffered a loss of revenue with its parks and cruise ships fully closed, or open with reduced capacity, due to the pandemic COVID-19.

Disney’s biggest growth was in its streaming subscriptions. The company said it secured 95 million Disney + subscribers in the quarter and now has more than 146 million paid subscribers. This is the first quarter since the company ended its free trial period.

CFO Christine McCarthy said the executives are “very happy with the conversion numbers we saw here, going from the promotion to becoming subscribers”. McCarthy also said in the conference call that the company “has also set that goal for more than 100 new titles a year. And that throughout Disney Animation, Disney Live Action, Pixar, Marvel, Star Wars, Nat Geo. And, of course, we will continue to add more to our library over time as well ”, demonstrating the company’s plan for growth in these areas.

Disney analysts: Goldman Sachs analyst Brett Feldman reiterated a buy rating and raised the target price from $ 211 to $ 225.

Needham analyst Laura Martin reiterated a wait rating.

Benjamin Swinburne, an analyst at Morgan Stanley, reiterated an overweight rating and target price of $ 200.

Rosenblatt Securities analyst Bernie McTernan reiterated a purchase rating and raised its target price from $ 210 to $ 220.

Strong growth in streaming, movies and park revenue: Goldman Sachs’ Feldman sees strong demand growth in 2021 in two main areas. First, from its streaming services, which he said will bring in more revenue when Disney raises subscription prices in February and March. Feldman also noted the potential acquisition of a customer with Disney’s planned launch of two Marvel films this spring.

Second, Feldman believes that park revenue will increase as the pent-up demand to visit Disney theme parks begins. Feldman said that “Disney’s core businesses remain well positioned for a rapid recovery as the economy reopens.”

Why Disney can beat Netflix: Needham’s Martin said Disney is valued at only half of what Netflix Inc (NASDAQ: NFLX) is even though Disney is beating Netflix in its only game.

Martin said Disney is surpassing Netflix because of better marketing skills, stronger titles and the ability to pull subsidiaries such as Lucas Filmes and Marvel to save costs. Martin, like McTernan and Feldman, sees Disney benefiting from the reopening of the economy in 2021, which she says is not the case with Netflix.

Long recovery, but the worst is over: Morgan Stanley’s Swinburne said that “while the road to recovery remains long and uncertain,” he believes the worst is over and expects revenue streams from Disney parks and cruises to continue to recover throughout 2021.

Swinburne also noted that Disney Hong Kong expects to reopen in the second quarter and pointed to better-than-expected retail sales at Disney stores for “Star Wars”, “Frozen 2” and “The Mandalorian”. Swinburne also said that Disney’s direct-to-consumer business has exceeded expectations, and that Disney + is expected to exceed 100 million subscribers soon.

Expanding streaming services: McTernan of Rosenblatt said Disney was able to benefit from both the themes of staying at home and the reopening of its businesses by increasing its streaming services, while surpassing theme park revenue estimates despite the pandemic. More conservatively, McTernan does not expect the park’s revenue to return to pre-pandemic levels by 2023, but noted that this could happen earlier, depending on the success of the vaccine’s launch.

DIS price action: Walt Disney Co shares fell 1.70% to $ 187.67 at the end of Friday.

Ella de Kross’s photo at Unsplash.