Shares of The Walt Disney Company (NYSE:DIS) are trading nearly 1% in today’s trading session afterWells Fargoanalyst Steven Cahall named DIS the Top Large-Cap Growth Idea for 2022.
The analyst also reiterated an Overweight rating and raised the $196.00 per share price target.
“Stock rewards require some risk. The past few months have shown that DIS will likely face some serious content obstacles if it is to meet its FY24 subscriber guidance. Thus, the backdrop for DIS into 2022 is a proper execution story, in our view. Given DIS's history in delivering the content goods, we think it's an attractive setup, so it's our favorite large-cap growth idea for 2022,” Cahall said in a client note.
Disney said earlier that it will ramp up investments in content as it tries to catch up with Netflix (NASDAQ:NFLX). The company needs to be averaging around 27 million net additions in each year from 2022 to 2024 in order to meet its Disney+ guidance.
“For NFLX, every +$2bn in content amort = ~25mm net adds historically. DIS's step-up in content suggests that amort growth will be at least that punchy. And, while we can't quantify the content value going to general entertainment (GE), we remind investors that DIS bought 21st Century Fox specifically to address its lack of prowess in content outside its core genres. So, we think DIS knows its weaknesses and will be throwing everything and the kitchen sink at it. We wouldn't be surprised to see someone like John Landgraf elevated to a sort of GE content czar to indicate DIS's focus. Our Disney+ net adds are back-end loaded for FY22 as the content really begins building in the spring,” Cahall said.
On parks, the analyst isn’t overly concerned as he sees a path to FY23 OI 19% above FY19.
“We see attendance recovering by F4Q22 and revenue per guest continuing to accelerate,” the analyst concluded.$Netflix(NFLX)$
Comments