Seeing the great potential for Disney Plus, the soon-to-be-released streaming service from Walt Disney (NYSE: DIS), Morgan Stanley Thursday upgraded the entertainment giant’s stock and raised the price target to $160 from $135.
Disney’s shares rose more than 2% during the early trading hours after the market responded positively to the bullish view of the analyst, who also forecast that the new business would raise the company’s subscriber base to above 130 million in the next five years.
According to the analyst, the substantial increase in the viewership of television shows and films in recent years bodes well for Disney Plus, which has elicited considerable interest among viewers after the announcement in April. Disney’s adjusted profit is likely to get a $11-per share boost from the new service by 2024.
Also see: The Walt Disney Company Q2 2019 Earnings Call Transcript
Disney continues to ramp up its content catalog, with an array of popular movies and television programs in the pipeline. Though the costs associated with the promotion of the brands might weigh down on profitability in the immediate future, the long-term prospects of the new venture will turn the table.
The upbeat outlook comes amid concerns of Disney Plus facing stiff completion from market-leading streamer Netflix (NFLX), which is better equipped for the race with competitive pricing and a well-established subscriber base.
For the fourth quarter, Disney reported a 3% increase in revenues to $15 billion, while adjusted earnings dropped 13% to $1.61 per share. The results, meanwhile, surpassed the estimates.
Since the company’s overall growth is dependent on the durability of its intellectual property, it needs to be factored in before taking the plunge as far as investments are concerned.
Shares of Disney rose by a quarter since the beginning of 2019 and so much in the past twelve months. They hit an all-time high of around $140 in April. The stock gained about 2% soon after trading started on Thursday. Meanwhile, Netflix traded 1% down in the early hours, after opening the session higher.