Disney Analyst Expects Blockbusters Wakanda Forever, Avtar To Dominate Upcoming Quarterly Results

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• Keybanc analyst Brandon Nispel reiterated Overweight on The Walt Disney Co (NYSE: DIS) with a $119.00 price target.
• The analyst expected a significant focus from CEO Robert Iger around the uniqueness of DIS's IP: Black Panther: Wakanda Forever and Avatar: The Way of Water, the top two highest-grossing theatrical releases in 4Q22.
• Nispel did not expect Iger to share plans for ESPN and Hulu or reveal his thoughts on M&A.
• The analyst did not have a strong opinion on M&A. However, he believes DIS processes fairly broad optionality and ultimately believes its business, as is, can achieve greater profitability in the next three years vs. its previous peak in FY18.
• Nispel expects the company to announce some restructuring, with reports post last quarter suggesting a hiring freeze was underway.
• The analyst expects core Disney+ (U.S. and International) to outperform expectations, with less confidence on Disney+ Hotstar..
• The analyst saw Hulu and ESPN+ coming in slightly below expectations as his churn data suggest some more significant churn impact from recent price increases.
• Similarly, Nispel expects subscription revenue to be above consensus, offset by lower advertising revenue given the challenging macro and poor F4Q22 performance in viewership, despite the launch of Disney+ with ads.
• The analyst believes Disney will reiterate its initial streaming subscriber targets and accelerate the path toward profitability with a pullback in marketing.
• Domestic parks' OI should be at least in line (with CMCSA Corp (NASDAQ: CMCSA) reporting some upside), while the global recovery and reopening of Hong Kong and Shanghai parks should provide a tailwind in FY23.
• While many likely believe Parks is entering a recession and believe DIS is over-earning, Nispel thinks Disney parks provide a unique experience and command pricing power that does not appear broken, so no fixes are necessary.
• Price Action: DIS shares traded lower by 1.35% at $109.22 on the last check Monday.

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