Disney shares ended the day down over 3.5% on Monday following a downgrade by BMO Capital. Disney’s recent bull run has seen the shares rise 24% over the past month.
Subscriptions, “the most important data point of the day,” according to BMO, remain ahead of expectations supported by a vast amount of new content.
Disney (DIS) announced at an investor day last week that it expects between 230-260 million subscribers by 2024, revised upward from the previous view of between 60-90 million subscriptions. The company also plans to release more than 100 titles to their service each year.
Uncertainty around how Disney’s ESPN brand will compete in the world of content streaming, coupled with the “considerable multiple expansion recently for both initial vaccine news and the direct-to-consumer (DTC) investor day,” remains a concern for BMO, and thus, the firm’s decision to remain on the “sidelines” seems appropriate for now. (See DIS stock analysis on TipRanks)
BMO Capital analyst Daniel Salmon did however raise his price target from $165 to $185 on Monday, despite downgrading his rating from a Buy to a Hold. This implies a 9% upside potential based on yesterday’s close. His valuation is based on Disney’s core business being valued at $65 per share and the combination of Disney+, ESPN+ and Hulu adding another $120, up from his previous valuation of $100 per share.
Consensus among analysts remains a Strong Buy based on 16 Buys and 4 Holds. The average price target of $175.56 implies a potential upside of around 4% over the next 12 months.
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