MoffettNathanson Remains Neutral on Walt Disney (DIS) After Sub Miss
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MoffettNathanson analyst Michael Nathanson reiterated a Neutral rating and $175.00 price target on Walt Disney (NYSE: DIS) after the company reported revenue of $15.6 billion (-13% growth vs. -12% est.). This was lower than expected, with a DPEP beat (-44% vs. -51% est.) more than offset by lower results at DMED (+1% vs. +6% est.). Within DMED, revenue growth at Linear Networks (-4%
vs. flat est.), DTC (+59% vs. +63% est.) and Content Licensing (-36% vs. -25% est.) all came in
below expectations. Much lower expense growth across the board drove a segment EBIT beat to $2.9 billion (+74% vs. +27% est.), with the biggest surprise coming from DTC, where a -$290 million loss was +$410 million better than our -$700 million estimate. However, the improving industry backdrop and management skill in cutting expense pales in comparison to the Disney+ subscriber miss.
The analyst did not make an investment call on the stock, admitting he missed the boat on the dramatic multiple acceleration due to Disney+ but stated "before Disney’s DTC pivot, this quarter’s blow-out earnings results would have pushed Disney’s stock higher, as operating profits came in better across the board. In particular, the growth in domestic park operations should warm bullish hearts. Yet, the slight miss on Disney+ subscribers this quarter and the more cautious outlook on second half subscriber growth is the headline. To us, we think the key questions are (1) “What will be Disney’s normalized earnings in the out years?” and (2) “What is the right earnings multiple to use at that point in time?”"
Shares of Walt Disney closed at $178.34 yesterday.
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