Disney (DIS) shares jumped by nearly 2% on Tuesday along with the broader market, extending a relief rally in the wake of strong first quarter earnings that added over 9% to its stock last week.
Overall, analysts remain especially impressed by the COVID-19 comeback story surrounding Disney’s parks and resorts business, which saw profits swing to the upside. The parks business reported revenue of over $7 billion, more than double from a year prior, and an operating profit of $2.45 billion (up from a loss of $119 million a year ago.)
Additionally, Disney+ subscriber additions jumped, and contrasted sharply against Netflix’s (NFLX) disappointing quarterly results. The two-year old streaming platform added a whopping 11.8 million paying users in the quarter— sharply topping analyst estimates of about 7 million, and a significant jump from the previous quarter’s 2.1 million.
In a recent note, Bank of America (BAC) called the results “striking,” and “significantly” raised its outlook for the stock as a result, reiterating Disney as a “Buy” with a $191 price target.
Bank of America added that its bull thesis hinged on the recovery of the company’s theme park division. Catalysts for the stock include Disney’s continued theme park recovery, direct-to-consumer rollouts in new geographies, new content, and potential price increases, the bank said.
Wells Fargo echoed similar sentiments after Disney’s Q1 results, with analyst Steve Cahall writing that “Disney is doing and saying all the right things: heavy content investments, rationality on sports rights, bundling, etc. We like the setup here for content success to drive the subs. Parks coming back in a big way provides earnings/valuation support in our view.”
Still, the analyst cautioned that “Disney+ is hardly out of the woods with a long way to FY24 guidance,” and competition in the sector stiffening.
Disney had 129.8 million paid subscribers at the end of 2021, and reiterated its target to bring on 230 million and 260 million subscribers in total to the service by the end of fiscal 2024.
Wall Street analysts have been cautious amid slowing subscriber growth across the sector, as stay-at-home dynamics associated with COVID give way to more normalcy. Just last month, Netflix reported slowing subscriber growth in the fourth quarter with one bear arguing that Disney is much better positioned long-term.
“Netflix is at a major competitive disadvantage to firms like Disney (DIS) [because] Disney has more ways to monetize content than streaming,” New Constructs CEO David Trainer told Yahoo Finance.
“Streaming is a commoditized business…and you need other ways to monetize that content if you want to have a sustainable platform,” he added.
“All streaming is is just another way to onboard customers, and it can be a loss leader for these other firms because they already make money. Netflix is just a loss leader,” Trainer said.
Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193
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