Barron’s Highlights Disney

The stock market is down a bit this morning but not too much. This looks to be a busy week for earnings, and next week will be even busier. This morning, Coke reported earnings of 55 cents per share. That was five cents more than expectations.

Over the weekend, Barron’s had nice things to say about Disney:

Under Chapek, Disney has faced the severest of financial stress tests and come out ahead. When parks and theaters emptied out a year ago, costs kept rolling in, and the fastest-growing part of the business, streaming, was consuming cash—as it still is. Yet, Disney generated $3.6 billion in free cash during its fiscal year ended last September.

It’s seen producing $3.3 billion this year, before the numbers begin a sharp rebound.

Investors have applauded the story. The company suspended its modest dividend last year. Yet the stock is up 45% since Chapek took over, versus 33% for the S&P 500 index. Netflix had passed Disney by stock market value. Now Disney, recently valued at $340 billion, is ahead by $100 billion, and bullish investors say there’s more to come.

(…)

Back in November 2019, when Disney+ launched, the company had a goal of reaching 60 million to 90 million subscribers by fiscal 2024. In March, it hit 100 million. Netflix took a decade to reach that milestone. It took Disney less than a year and a half. “We were very confident in our proposition, but I think it caught everybody by surprise,” says Chapek.

(…)

Disney bull Alexia Quadrani, who covers the stock for J.P. Morgan, reckons the shares can hit $220 by the end of this year, 18% above their recent quote. That price comes from a sum-of-the-parts analysis that assumes the streaming business is worth 10 times revenue. Netflix trades at eight times revenue.

Earnings are due out on May 13.

Posted by on April 19th, 2021 at 10:37 am


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