- Disney’s fourth-quarter earnings report Thursday will land just five days before the company releases its highly anticipated streaming platform Disney Plus.
- Wall Street has been evaluating the media conglomerate’s billion-dollar effort to break into the direct-to-consumer video space much more closely in recent months.
- Investors and analysts will be looking for guidance on how many subscribers Disney expects to bring onto the services in the coming quarters.
- Here’s what four Wall Street firms are talking about leading up to the report.
- Watch Disney trade live on Markets Insider.
Disney is set to report fourth-quarter earnings on Thursday after the closing bell – just five days before its long-awaited launch of Disney Plus.
Investors and analysts will be eager to see what type of guidance the company provides around subscriber expectations for its trio of streaming platforms including Hulu and ESPN Plus.
The company announced a partnership with Verizon in late October to offer the wireless carrier’s customers a free year of Disney Plus. The effort is expected to help ramp up subscriber growth after the service launches on November 12.
There will also likely be a focus on how much cash the company plans to invest in its direct-to-consumer video efforts and what sort of effect that will continue to have on earnings.
Wall Street is expecting Disney to post $US1.56 billion in profit on $US19 billion in revenue for the fourth quarter, compared to about $US2.32 billion in profit on $US14.3 billion in sales during the same period last year.
Disney had a bumpy third-quarter report, with shares falling about 4% after the company posted earnings and revenue below analyst estimates.
Revenue in Disney’s movie studio division came in below expectations in the third quarter despite several box-office hits. The segment also saw higher expenses due to challenges integrating 21st Century Fox assets, which the company will likely provide an update on in its fourth-quarter results.
Here’s what four analysts are talking about ahead of Disney’s latest earnings report:
Morgan Stanley: “We are raising our Disney Plus estimates.”
Price target: $US160
“We see Disney as unique among peers with the brands and scale to build a global, profitable streaming business. We are raising our Disney Plus estimates, although lowering near-term EPS. We see shares offering unique to a diversified portfolio of growth assets anchored by Disney IP,” Morgan Stanley analyst Benjamin Swinburne wrote in a note to clients October 2.
Swinburne added: “We now expect Disney Plus to reach 15-16mm subscribers by FYE20 and over 75mm by FYE24.”
Macquarie: “We expect a smoother F4Q report leading into the Disney+ launch.”
Price target: $US160
“We expect a smoother F4Q report leading into the Disney+ launch. Disney is by far the best-positioned media company to transition to an OTT world,” Macquarie analysts wrote in a note to clients on October 17.
The analysts added: “We believe Disney set a low bar on expectations for F4Q, and hence we would not be surprised to see a good print from Disney, which could revive investor enthusiasm for the stock.”
BMO Capital Markets: “We are eager to see if management will share an early read on Disney+ subscribers.”
Price target: $US170
“We are eager to see if management will share an early read on Disney+ subscribers based on pre-sales, or wait for post-launch for the first figure,” BMO Capital Markets analyst Daniel Salmon wrote in note to clients Wednesday.
Salmon continued: “Disney is our only Outperform-rated stock in the Entertainment group and notwithstanding last quarter’s bumps, we believe the stock can work through yearend, with visible catalysts including the launch of Disney+ on November 12.”
Credit Suisse: “Beyond level of Disney+ success, key will be Disney’s willingness to invest in sports.”
Price target: $US150
“Beyond level of Disney+ success, key will be Disney’s willingness to invest in sports (will ABC/ESPN go after Sunday package, ESPN+ go after NFL Sunday Ticket, and DTC pursue int’l soccer/cricket rights given scale now in India & Latam) and to scale Hulu (particularly int’l, but also originals given the ramp at competing streaming services),” Credit Suisse analysts wrote in a note to clients Tuesday.