Disney Heading for Netflix Margins, Shares Rise

By Christiana Sciaudone

Investing.com —  Disney’s streaming service will be a boon for the company, according to two analysts.

Shares are up 2.2% on Wednesday after comments from Wells Fargo (NYSE:WFC) and Rosenblatt, who also raised their price targets on the stock.

Wells Fargo reiterated an overweight rating and raised its price target on Disney to $201 from $182 following its investor day two weeks ago, saying it expects the business to produce future margins akin to Netflix (NASDAQ:NFLX)’s, CNBC reported. Netflix boasts a profit margin of 12% and an operating margin of 17%. That compares to Disney’s -4.4% and 6.7%, respectively.

Earlier this month, the company revealed more than 100 new movies and shows for its streaming service, including those connected to franchises like Star Wars, Marvel, FX and National Geographic.  

“We’d say short/medium-term catalysts are about the streaming ramp, and how Parks performs once capacity begins to normalize in H2 FY21,” the firm said in a note, according to CNBC. Disney’s parks around the world have been shuttered for much of 2020 on government attempts to stem the spread of the coronavirus, leading to a dip in revenue in that segment, as well as layoffs. The Parks, Experiences and Products segment of the company saw sales drop 61% for the fiscal fourth quarter of 2020 compared to a year earlier. That compares with an 11% increase in Media Networks, and a 41% jump in Direct-to-Consumer and International.

Rosenblatt Securities raised its price target to a Street-high view of $210 from $155 on a “wave of new, original content coming to Disney+,” according to Bloomberg. Netflix has much higher subscriber numbers and streaming revenue, but Disney is poised to narrow the gap over the coming years. 

On Tuesday, Morgan Stanley (NYSE:MS) analyst Benjamin Swinburne raised the price target on Disney to $200 from $175 and reiterated a buy-equivalent rating, according to StreetInsider. The shares currently trade around $173.94.