Morgan Stanley Turns Bullish On Disney’s Streaming Service

Morgan Stanley Turns Bullish On Disney’s Streaming Service
June 14, 2019


The shares of Walt Disney Company (DIS) recorded a new yearly high of $142.37 yesterday after Morgan Stanley analyst Benjamin Swinburne opined that the Disney+, the media company’s streaming service, will add subscribers faster than anticipated. Swinburne also stated that the company is on the right track to realize a long-term profit from the venture. The stock, which closed at $141.74, is up $6.02 or 4.44% from the prior close, and has gained 28.3% in the past one year.

The analyst stated that Walt Disney is in the process of launching its streaming service faster than anticipated, and Disney+ owns more content than he initially thought. In the US, the service is expected to be launched on November 12th.

Swinburne also believes that the quick addition of subscribers will boost profitability in a short period. The analyst said, “Despite higher start-up costs, we see a faster ramp at Disney Plus and accelerated profitability supporting a premium multiple.”

According to the analyst, the company is expected to sign up 130 million over-the-top subscribers across the globe by 2024. He also anticipates adjusted earnings per share of over $11 in the next five years. The platform, unveiled in April, is expected to lure roughly 13 million clients by the end of fiscal 2020 and 70 million by 2024.

In fiscal 2018, Disney reported earnings of $7.08 per share. For 4Q18, the company posted 3% growth in revenues to $15 billion, while adjusted earnings declined 13% to $1.61 per share. The results exceeded Wall Street estimates.

Regarding investment in Disney stock, Swinburne said, “Stepping back and admittedly taking the long view, investing in Disney shares is a play on the durability of its IP.”

The analyst is optimistic that a major portion of $15 billion to $20 billion spent each year by people on movies and other Television content will eventually go to Disney Plus.

According to Swinburne, Disney’s initiative in increasing its content portfolio will enable it to gain from the considerable direct-to-consumer streaming opportunity that lies ahead.

He further argues that Disney is already spending a lot of money on the marketing of its brands, predominantly films, and streaming service is not designed to encompass all categories of viewers. As a result, the analyst argues that the company requires only less content volume.

Swinburne added, “We believe the market has often overstated the risk and underappreciated the reward of the transition to streaming.”

The streaming service is anticipated to cost subscribers $6.99 per month, or $69.99 per year, which was at the top end of analyst’s range.

Based on the above arguments, Benjamin Swinburne raised his price target for the stock of Disney to $160, from $135 issued earlier.

The historical price chart indicates that the stock of Disney is trading in uncharted territory. The stochastic indicator is also in the bullish zone. As a result, we can expect the stock to move up in the short-term.

dis - technical analysis - 14th June 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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