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Wells Fargo on Disney: ‘This force awoke’

Iryna Kirby
Producer

Just as Disney is getting ready to enter the streaming galaxy far, far away — one Wall Street bank has a clear message for Disney investors: The Force is strong with this one.

Analysts at Wells Fargo initiated coverage of The Walt Disney Company (DIS) with an Outperform rating and a $173 per share price target. The bank also called the company its “top pick in media” because it has “the best content, strategy and management.”

“We think Disney is the best of many worlds. It’s the best creator of content, as evidenced by its box office results and long history,” Wells Fargo Senior Analyst Steven Cahall wrote in a note to clients titled “This Force Awoke.”

“Its fandom is unrivaled, driving a unique asset at Parks as content lovers immerse themselves in all-Disney experiences. It’s also now poised to be a leader in direct-to-consumer (DTC) with the launch of Disney+ and consolidation of Hulu.”

The streaming wars

Disney has recently shaken up the streaming space by announcing its Disney+ subscription bundle (which includes Disney+, ESPN+ and Hulu), which is set to launch on November 12 for $12.99 a month.

The team at Wells Fargo believes the first year of Disney+ could “exceed subscriber expectations,” with Hulu “tapping into a much deeper content pool.” By end of 2020, Cahall’s team estimates 16 million Disney+ subscribers, 39 million Hulu subscribers and 5 million ESPN+ subscribers.

“We believe Disney’s beauty is that it’s a hub of content creation, with a formidable content engine that includes spokes of monetization from parks, consumer products, media networks, and DTC,” Cahall writes.

Graphic by David Foster

Disney: More than a media company

Wells Fargo goes as far as to argue that Disney is “arguably the least media company in Media,” as it now resembles more of a consumer brand.

“At its cap and quality, Disney is an EPS company and we think increasingly the comp set is other leading global consumer brands like Alphabet (GOOGL), Coca-Cola (KO), Nike (NKE), Starbucks (SBUX), and Walmart (WMT), which are 20-30x P/E stocks,” Cahall says.

Shares of Disney (DIS) are up more than 20% so far this year. In comparison, one of Disney’s biggest streaming rivals, Netflix (NFLX), is down nearly 4% year-to-date.

Iryna Kirby is a Producer for Yahoo Finance. Follow her on Twitter at @IrynaNesko.

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