Disney has recently set a critical goal to improve its stock performance. The company is now acting with a strong sense of urgency to address this goal, particularly in its streaming business. Despite ongoing financial losses, Disney’s streaming business has shown significant progress and its Chief Financial Officer, Hugh Johnston, has outlined a double-digit margin target for this segment.
While an exact timeline for achieving this target was not revealed, Johnston emphasized the company’s determination to get there swiftly. This statement resonated strongly with investors and analysts. MoffettNathanson analyst Michael Nathanson described it as one of the most impactful remarks on the call, highlighting Disney’s renewed focus on becoming a profitable player in the streaming industry.
Opinion: Disney’s Commitment to Building a Profitable Streaming Business
According to Nathanson, no other company has convincingly demonstrated their potential to develop a large and profitable streaming business like Disney. He believes that there is now a newfound urgency within Disney to dedicate more time and resources to seize this opportunity.
Nathanson has given Disney’s stock a buy rating with a target price of $120, reflecting his positive outlook on the company’s prospects. The stock saw an 8% increase in premarket trading on Thursday.
Bernstein analyst Laurent Yoon also praised Disney’s fiscal first-quarter report and call, noting several positive aspects. However, he stressed that the key metric to focus on is the profitability of Disney’s direct-to-consumer (DTC) segment.
There is optimism on Wall Street due to the improvement in streaming losses. In the latest quarter, streaming losses decreased from $420 million to $138 million. This positive trend has raised expectations that Disney will achieve its streaming profitability target sooner than anticipated.
Disney’s Path to Success and Investor Confidence
Disney has set ambitious goals for the fiscal fourth quarter, but doubts are beginning to arise. However, some investors now see the fiscal third quarter as the “new goalpost,” and there are even expectations that Disney could achieve its milestone in the ongoing fiscal second quarter.
According to analyst John Yoon, Disney seems to have “turned a corner.” While the company still faces a few remaining battles, such as a proxy fight with Trian Partners, these challenges are expected to be resolved by early April. Yoon believes that Disney’s days of fixing internal issues may be coming to an end.
In light of this positive turn of events, Yoon has boosted his price target on Disney’s stock to $115, maintaining an outperform rating. Another analyst, Vijay Jayant from Evercore ISI, finds Disney’s streaming-margin target to be reassuring. He commends the company’s overall trajectory and believes that Disney is on a credible path to become an earnings compounder with sustainable robust free cash flow. Jayant has increased his price target to $115 and also maintains an outperform rating.
Laura Martin from Needham is equally optimistic about Disney’s future prospects. She has upgraded Disney shares to buy from hold and established a target price of $120. Martin appreciates Disney’s growing focus on cost control, particularly highlighting Johnston’s comments that the company is on track to meet or exceed $7.5 billion in cost savings. The use of the word “exceed” implies that this outcome is now more likely.
Overall, Disney’s recent strategic pivots, management changes, and efforts to address both secular shifts and cyclical headwinds have positioned the company for success. Analysts express confidence in Disney’s ability to generate sustainable growth and believe that it is reclaiming its position as a leader in the industry.
