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The Zacks Analyst Blog Highlights: Disney, JP Morgan, Netflix and Amazon
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For Immediate Release
Chicago, IL –March 7, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Disney (DIS - Free Report) , JP Morgan (JPM - Free Report) , Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Disney shares have lagged the market so far this year, but have trended in the right direction as the entertainment power prepares to launch its streaming service in late 2019. Now, analysts at JP Morgan predict that Disney+ will see its subscriber base eventually challenge Netflix.
JP Morgan Note
Disney’s brands and massive infrastructure are poised to help the company’s soon-to-be-launched stand-alone streaming service become hugely popular, according to JP Morgan analysts. The company is set to debut Disney+ later this year. The service will feature an array of new original Disney, Pixar, Marvel, Star Wars, and National Geographic content. Disney also said the new streaming platform will include “unprecedented access” to Disney’s library of film and television offerings.
The entertainment conglomerate’s streaming service is projected to eventually boast 160 million subscribers worldwide, according to JP Morgan analyst Alexia Quadrani. “While there is little question there are more direct-to-consumer services today than ultimately should survive, we have no doubt that Disney+ remains on the short list of products that should prevail longer-term,” Quadrani wrote in a note.
“Our confidence in the resilient success of Disney+ comes from the company's unmatched brand recognition, extensive premium content, and unparalleled ecosystem to market the service.”
Netflix closed the fourth quarter with 139.3 million paying memberships and expects to add 8.9 million subscribers in Q1 2019 to reach 148.16 million. The current king of streaming clearly has a massive head start and expects to expand for years, which means Netflix will likely be far larger than Disney+ if and when it ever hits 160 million subscribers.
Still, the JP Morgan analyst understands that the larger streaming market is set to become even more competitive and lucrative as other large companies look to challenge Amazon Prime and Netflix. With that said, Disney has set itself up for success based on price and content. “Disney has already shown some disposition to forego short-term revenues in order to develop the streaming business, by pulling content from Netflix once its contract expires at the end of the calendar 2018 film slate,” the JP Morgan analyst continued.
Outlook
Disney has yet to officially unveil many details about its new streaming offering, aside from a few of the original shows. Executives have said that Disney+ will cost less than Netflix—its premium plan costs $15.99 a month—because they want the service to reflect its smaller catalog. Investors should note that Disney is ready to detail and demonstrate Disney+ at its investor day in April and also provide insights into its larger direct-to-consumer push.
Disney already successfully launched ESPN+ in April 2018 at a $4.99 per month price point. The service, which doesn’t feature any of ESPN’s main offerings, has already hit 2 million paid subscribers. Disney’s $71 billion deal to acquire major 21st Century Fox assets is also nearing completion. This will not only bolster its box office business, but eventually help Disney offer an even more attractive streaming service.
Looking ahead, our Zacks Consensus Estimate calls for Disney’s current quarter revenues to slip 0.73% to $14.44 billion. Meanwhile, Disney’s full-year revenues are projected to climb 1.76%. Jumping a bit further ahead, DIS’ fiscal 2020 revenues are expected to climb 5.1% higher than our 2019 projection.
At the bottom end of the income statement, the company’s outlook does not appear very strong as it continues to spend heavily on its streaming future. The firm’s adjusted 2019 earnings are projected to come in nearly flat, with 2020 expected to pop 2% above our current-year estimate.
Bottom Line
Disney is a powerhouse that will likely help shape the entertainment industry for years to come. The company’s family films and action movies have come to dominate the box office, and it has expanded its theme park and resort footprint. And of course, it is set for a successful streaming future, bolstered by its Fox deal, and looks poised to be a major player in live sports—which will only become more attractive to advertisers as non-ad supported platforms proliferate.
Disney is also a dividend payer, with a yield of 1.54%, that is trading at 15.9X forward 12-month Zacks Consensus EPS estimates. This represents a discount compared to its industry’s 18.8X average, the S&P’s 16.6X, its own five-year high of 22X, and its five-year median of 17X. This means that Disney’s valuation is hardly stretched at the moment.
Disney stock hovered at roughly $114 a share through morning trading Wednesday, which marked a 5% downturn from its 52-week high. Disney currently sports a Zacks Rank #3 (Hold) and is certainly a stock to consider based on its long-term growth plans.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Disney, JP Morgan, Netflix and Amazon
For Immediate Release
Chicago, IL –March 7, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Disney (DIS - Free Report) , JP Morgan (JPM - Free Report) , Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Disney (DIS - Free Report) Streaming Looks to Challenge Netflix (NFLX - Free Report) : Should You Buy?
Disney shares have lagged the market so far this year, but have trended in the right direction as the entertainment power prepares to launch its streaming service in late 2019. Now, analysts at JP Morgan predict that Disney+ will see its subscriber base eventually challenge Netflix.
JP Morgan Note
Disney’s brands and massive infrastructure are poised to help the company’s soon-to-be-launched stand-alone streaming service become hugely popular, according to JP Morgan analysts. The company is set to debut Disney+ later this year. The service will feature an array of new original Disney, Pixar, Marvel, Star Wars, and National Geographic content. Disney also said the new streaming platform will include “unprecedented access” to Disney’s library of film and television offerings.
The entertainment conglomerate’s streaming service is projected to eventually boast 160 million subscribers worldwide, according to JP Morgan analyst Alexia Quadrani. “While there is little question there are more direct-to-consumer services today than ultimately should survive, we have no doubt that Disney+ remains on the short list of products that should prevail longer-term,” Quadrani wrote in a note.
“Our confidence in the resilient success of Disney+ comes from the company's unmatched brand recognition, extensive premium content, and unparalleled ecosystem to market the service.”
Netflix closed the fourth quarter with 139.3 million paying memberships and expects to add 8.9 million subscribers in Q1 2019 to reach 148.16 million. The current king of streaming clearly has a massive head start and expects to expand for years, which means Netflix will likely be far larger than Disney+ if and when it ever hits 160 million subscribers.
Still, the JP Morgan analyst understands that the larger streaming market is set to become even more competitive and lucrative as other large companies look to challenge Amazon Prime and Netflix. With that said, Disney has set itself up for success based on price and content. “Disney has already shown some disposition to forego short-term revenues in order to develop the streaming business, by pulling content from Netflix once its contract expires at the end of the calendar 2018 film slate,” the JP Morgan analyst continued.
Outlook
Disney has yet to officially unveil many details about its new streaming offering, aside from a few of the original shows. Executives have said that Disney+ will cost less than Netflix—its premium plan costs $15.99 a month—because they want the service to reflect its smaller catalog. Investors should note that Disney is ready to detail and demonstrate Disney+ at its investor day in April and also provide insights into its larger direct-to-consumer push.
Disney already successfully launched ESPN+ in April 2018 at a $4.99 per month price point. The service, which doesn’t feature any of ESPN’s main offerings, has already hit 2 million paid subscribers. Disney’s $71 billion deal to acquire major 21st Century Fox assets is also nearing completion. This will not only bolster its box office business, but eventually help Disney offer an even more attractive streaming service.
Looking ahead, our Zacks Consensus Estimate calls for Disney’s current quarter revenues to slip 0.73% to $14.44 billion. Meanwhile, Disney’s full-year revenues are projected to climb 1.76%. Jumping a bit further ahead, DIS’ fiscal 2020 revenues are expected to climb 5.1% higher than our 2019 projection.
At the bottom end of the income statement, the company’s outlook does not appear very strong as it continues to spend heavily on its streaming future. The firm’s adjusted 2019 earnings are projected to come in nearly flat, with 2020 expected to pop 2% above our current-year estimate.
Bottom Line
Disney is a powerhouse that will likely help shape the entertainment industry for years to come. The company’s family films and action movies have come to dominate the box office, and it has expanded its theme park and resort footprint. And of course, it is set for a successful streaming future, bolstered by its Fox deal, and looks poised to be a major player in live sports—which will only become more attractive to advertisers as non-ad supported platforms proliferate.
Disney is also a dividend payer, with a yield of 1.54%, that is trading at 15.9X forward 12-month Zacks Consensus EPS estimates. This represents a discount compared to its industry’s 18.8X average, the S&P’s 16.6X, its own five-year high of 22X, and its five-year median of 17X. This means that Disney’s valuation is hardly stretched at the moment.
Disney stock hovered at roughly $114 a share through morning trading Wednesday, which marked a 5% downturn from its 52-week high. Disney currently sports a Zacks Rank #3 (Hold) and is certainly a stock to consider based on its long-term growth plans.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.