MW Disney's stock gets upgrade amid content 'renaissance' and streaming profit growth

By James Rogers

'After years of cord-cutting pressures, Disney is finally at a point where streaming profit growth will more than offset linear TV declines,' analyst says

Walt Disney Co.'s stock was upgraded to buy Tuesday by analyst firm Redburn Atlantic, which cited improved content performance and growth in streaming profit.

"After years of cord-cutting pressures, Disney is finally at a point where streaming profit growth will more than offset linear TV declines," Redburn Atlantic analyst Hamilton Faber wrote in a note released Tuesday. "This is an important moment, signaling the end of a structural headwind that has curtailed Disney share price appreciation to just 20% over the past ten years versus the S&P 500's 190%."

"With a renaissance in content performance and streaming on a more solid footing, management's decision to issue three-year guidance looks well founded," the analyst added.

Related: Fubo's stock skyrockets as Disney Hulu + Live TV deal creates YouTube TV rival

Redburn Atlantic noted one concern: Disney's $(DIS)$ Parks outlook for fiscal 2026, which Faber said "seems optimistic" due to competition from Comcast Corp.'s $(CMCSA)$ new Epic Universe theme park. "However, with structural issues fading and operating momentum strong, we see the shares rerating and expect Disney to move to a 10% premium to the S&P 500," he wrote. Redburn Atlantic raised its Disney price target to $147 from $100.

Disney shares ended Tuesday's session up 0.3%. The stock is up 24.2% in the past year.

"Content is the lifeblood of the company, and performance has improved significantly over recent quarters," Faber wrote, pointing in particular to the success of recent blockbusters "Deadpool & Wolverine" and "Inside Out 2." The hugely popular "Inside Out 2" reached $1 billion at the box office just 19 days after its release in June, setting a new record for an animated movie. "Deadpool & Wolverine," which opened in July, quickly set a new record for an R-rated movie.

Related: How Disney's stock can book even more gains after its best year since 2020

This is an eventful time for the company. Earlier this week, FuboTV Inc. $(FUBO)$ and Disney announced a deal to combine Disney's Hulu + Live TV service with Fubo.

The combined business will operate under the Fubo publicly traded company name and will be led by the existing Fubo management team, the companies said in a statement. Disney will have 70% ownership of the resulting company.

Importantly, all litigation between Fubo and Disney has been settled as part of the deal. Fubo had launched legal action against Disney, Fox Corp. $(FOX)$ $(FOXA)$ and Warner Bros. Discovery Inc. (WBD) over the Venu Sports streaming service, arguing that it could reduce competition.

Related: Disney raises its annual dividend by 33% following 'highly successful year'

"For Disney, the transaction is value accretive and eases the path toward Venu launch," J.P. Morgan analysts Nikhil Aluru and David Karnovsky wrote in a note released Monday. "With 70% ownership, [Disney] will continue to consolidate the asset, but the deal does provide some level of separation and long-term clarity that was lacking previously."

Fox Corp. and News Corp $(NWSA)$ $(NWS.AU)$, the parent of MarketWatch publisher Dow Jones, share common ownership.

-James Rogers

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January 07, 2025 16:32 ET (21:32 GMT)

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