Dow Jones Leader Disney Makes Strong Move Ahead Of Earnings

Entertainment behemoth Disney (DIS) reports second-quarter earnings early Tuesday. Two analysts raised price targets on Monday noting rebounding theme park traffic, but streaming concerns persist. Meanwhile, Disney stock has been the top performer on the Dow Jones Industrial Average this year.

Netflix and chill, make it a movie night with Max, or pick a new show on Paramount Plus? These days there are more streaming services than ever, and customers have only so much time — and money — they’re willing to spend on each. For Disney stock and the best streaming services to compete, do they need to merge to survive?” data-nosnippet=”true” data-permalink=”https://www.investors.com/ibd-videos/videos/best-streaming-services-competing-your-attention-what-can-save-disney-discovery-and-paramount” jw-video-key=”XzLTBTPN” vid-authors=”MEREDITH HEYMAN” vid-cat=”Industry Insights” vid-date=”11/13/2023″ vid-date-tmsp=”1699876577″ vid-dom-id=”8771639-663921585082a” vid-id=”8771639″ vid-image=”https://10xwealthreport.com/wp-content/uploads/2024/05/echo/XzLTBTPN-640×360.jpg” vid-name=”The Best Streaming Services Are Competing For Your Attention. What Can Save Disney Stock, Discovery And Paramount?” vid-repeat=”1″ vid-top=”false” vid-url=”https://content.jwplatform.com/manifests/XzLTBTPN.m3u8″ vid-width=”50″> X

Deutsche Bank on Monday increased its operating income estimates for Disney to reflect improved theme park, sports and studio performance, The Fly reported. But it expects that growth to be partially offset by lower direct-to-consumer numbers.

Disney appears to have “regained its stride,” the firm wrote, adding there’s a greater likelihood for positive earnings revisions the rest of the year with relatively low risk for forecast cuts. However, Deutsche Bank doesn’t expect Disney stock to offer tremendous upside unless its price-to-earnings multiple expands. The firm lifted its price target on DIS stock to $130 from $125 and kept a buy rating.

Loop Capital hiked its target for Disney to $140 from $113 on Monday and maintained a buy rating on the stock. Increased consumer confidence and easier comparable data should provide stability for Disney’s theme park division, the firm wrote. Meanwhile, Loop Capital said it’s starting to see the seeds of a film turnaround. For the second quarter, Loop expects streaming losses to be closer to break-even and ahead of guidance.

Disney Earnings On Tap

Analysts expect Disney earnings growth to slow for the second quarter in a row, increasing 18.3% to $1.10 per share. FactSet predicts revenue 1.4% to $22.12 billion.

Analysts forecast Disney+ subscribership increases to 154.5 million from 149.6 million in Q1, but down from 157.8 million last year.

Wall Street forecasts Disney reports total streaming subscribership, including Hulu and ESPN+, of 230.73 million for the second quarter. The Dow Jones giant recorded a total of 231.2 million subscribers in Q2 last year and 224.5 million in the first quarter, respectively.

FactSet predicts Disney theme park revenue increases 8% to $7.3 billion.

Sports And Streaming Deal Discussions

Meanwhile, grocery chain Kroger (KR) is in discussions to offer Disney+ to paying members of its Kroger Boost delivery program, Bloomberg reported on May 1. If the deal goes through, Kroger Boost members would have access to Disney’s streaming service this year at no additional cost.

Elsewhere, Disney is expected to pay an average annual fee of $2.6 billion to renew its deal with the NBA, up from its current fee of $1.5 billion, the Wall Street Journal reported at the end of April. And Comcast (CMCSA)-owned NBCUniversal is working on a $2.5 billion bid to win the rights from Warner Bros. Discovery (WBD) and TNT.

Warner Bros. failed to reach a new agreement before its exclusive negotiating window expired in late April, which allowed NBC to make a bid, according to the WSJ.

But Disney and the new TV partner will air fewer basketball games under the new agreements after Amazon (AMZN) Prime secured a major streaming deal on April 26, The Athletic reported.

Amazon’s deal begins with the 2025-2026 season and is expected to last at least 10 years. The Prime Video streaming service will include regular season and postseason games, with the possibility of conference finals in the future. Financial terms of the deal were not disclosed.

Elsewhere, ESPN, FOX and Warner Bros. on Feb. 6 announced a joint venture to develop and launch a new sports streaming service in the U.S. this fall. The new product will combine content from Disney-owned ESPN, along with TNT and Fox Sports and feature the major U.S. sports leagues, many top college divisions, as well as The Masters, FIFA World Cup, Wimbledon, Formula 1 and more.

Feuds Settled

Disney at the beginning of April won its “distracting” proxy board battle against Trian Fund Management and Blackwells Capital during its annual shareholder meeting. Nelson Peltz’s Trian firm and Blackwells had campaigned for influence over the board.

Trian sought to place Peltz on the board, along with former Disney CFO Jay Rasulo. The firm had a target of reaching margins of 15% to 20% by 2027. Blackwells angled to place three of its nominees on the board. The firm also floated the idea of potentially spinning out Disney into three separate, public entities.

Elsewhere, Disney and Florida Gov. Ron DeSantis on April 3 reached a settlement agreement regarding the Central Florida Tourism Oversight District, which runs the special tax district where Walt Disney World is located.

The disagreement started over Florida’s 2022 Parental Rights in Education Act, which restricted discussions in classrooms of sexual orientation and gender identity.

Under the settlement, the Central Florida Tourism Oversight District agreed to work with Disney to update the 2020 comprehensive plan. The settlement also included two new DeSantis appointees to the district board. Disney executives indicated they can work with the current structure, NPR reported.

The agreement opens the door for additional theme-park development in Florida. Disney plans to invest $17 billion in Florida over the next decade. The investment is part of a $30 billion spending plan to upgrade its theme parks.

Disney Stock Performance

DIS stock swung 2.3% higher to 116.25 on Monday to push back above its 50-day moving average.

Shares are trading tightly in the bottom half of a five-week flat base with a 123.74 buy point, according to MarketSurge charts.

Monday’s move would offer an early entry, if it weren’t for Disney earnings.

Disney stock is the Dow Jones leader in 2024, up roughly 8%. . American Express (AXP) ranks second with about a 24% advance.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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