Disney Shares Leap 10% as Wall Street Cheers Positive Earnings, New Initiatives
Disney shares soared 10% Thursday after the entertainment giant reported a solid fiscal first quarter, announced a $1.5 billion move into video games and said it plans to launch a new sports streaming service with Warner Bros. Discovery and Fox Sports.
Wall Street’s response to the report, which included several upgrades and a raft of price target hikes indicating expectations for strong stock gains, countered negative comments from activist investor Nelson Peltz, whose Trian Fund Management is leading a proxy fight in an attempt to get two seats on the Disney board.
Disney shares gained $10.11, or 10.2%, to $109.25 in morning trading, its highest point in a year. Trading volume was extremely high, with more than double the number of shares that change hands during a typical day exchanged just an hour into Thursday’s session.
Disney is “officially back on offense,” Wells Fargo analysts wrote while raising the firm’s price target to $128 from $115 and keeping an “Overweight,” or “Buy” rating on the shares, according to financial information publisher TheFly.com.
The company reported flat revenue of $23.5 billion for the quarter, with earnings per share rising to $1.22, topping Street expectations.
“What’s clear is that the important transformation we undertook last year is bearing fruit,” Iger told investors during a conference call after the release Wednesday. “And looking at our results this quarter, we can say with confidence, our strategy is working.”
Needham analyst Laura Martin upgraded Disney to “Buy” from “Hold,” setting a $120 price target, predicting strong earnings per share growth for the year as cost savings kick in further.
She also expects Disney’s streaming business, which saw a 12% bump in revenue over the same quarter last year and narrowed its loss by 70% in the period, to break even by the end of the year.
The note also flagged the new ESPN Sports joint venture with Fox and Warner Bros. Discovery and its $1.5 billion investment in “Fortnite” studio Epic Games, along with the exclusive rights to Taylor Swift’s “Era’s Tour” film for Disney+ as signs that “The Magic’s Back.”
The comment plays on Peltz’ “Restore the Magic” campaign among Disney’s shareholders in his quest for a director’s seat. Shareholders will cast their votes on April 3.
With about a dozen price target hikes, the Street sentiment was clearly in Disney’s favor, but Goldman Sachs was a naysayer, cutting its target to $120 from $125, though it kept a “Buy” rating on the shares.
Disney is making progress on its “lengthy to-do list,” the analyst wrote in a note to investors, according to TheFly. But it sees “traction” against the company’s cost savings initiatives ahead.
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