By Jon Swartz
The House of Mouse roared Thursday, when Walt Disney Co. announced its best financial results since the start of the pandemic, hurtling its shares up 5% in after-hours trading Thursday and the stock was still up Friday.
Analysts are lauding across-the-board earnings and revenue that topped out at 50 cents a share ($918 million in net income) and $17 billion in revenue.
Disney’s /zigman2/quotes/203410047/composite DIS -1.12% streaming service Disney+ exceeded forecasts to reach 116 million subscribers, while the television networks such as ESPN and ABC reported sales of $6.96 billion, and Disney’s theme parks and product sales segment reported $4.34 billion in revenue as it slowly reopened in the U.S. and abroad in the wake of the pandemic.
“We believe that Disney’s multiple is driven by momentum in [direct-to-consumer] – most notably Disney+ subscribers,” Michael Nathanson of Moffett Nathanson said in a note Friday. He forecasts Disney’s DTC revenue will nearly triple from $16.5 billion in fiscal 2021 to $46.6 billion in fiscal 2026 on “massive ramping in Disney+ subscribers and pricing power in high-RPU markets.”
Read more: Disney produces best earnings and sales since before pandemic, stock pops 5% higher
What Needham & Company analyst Laura Martin liked most about the quarter was the performance of Disney’s direct-to-consumer business (DTC), the cornerstone of Disney CEO Bob Chapek’s corporate strategy. Martin, who maintained a hold on the company’s stock in an Aug. 13 note, pointed to $4.26 billion in revenue for DTC, up 57% year-over-year, and 174 million total subscribers.
In raising its price target to $210 and maintaining an outperform rating on Disney, Macquaire Capital analyst Tim Nollen highlighted the addition of 8.7 million subscriptions to 116 million amid competition from Netflix Inc. /zigman2/quotes/202353025/composite NFLX +1.78% , Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.53% , AT&T Inc. /zigman2/quotes/203165245/composite T -1.05% , Comcast Corp. /zigman2/quotes/209472081/composite CMCSA +0.35% , and Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -2.90% .
“Disney+ is off to a very strong start, which we believe is the key variable governing stock performance,” Cowen Inc. analyst Doug Creutz said in an Aug. 13 note that maintained a perform rating and price target of $147.
“We still have reservations about the long-term strategy, particularly the wisdom of the Fox acquisition, and we think the company will eventually recover from current pandemic-related macro difficulties,” Creutz continued. “However, valuation appears to fully discount both an economic recovery and accelerated profit progress at the company’s DTC segment.”