JPMorgan dubbed Walt Disney Company as its “favorite name” among media stocks — seeing the company's potential after its well-received earnings report and conference call.
Despite the caution regarding the media industry, JPMorgan’s Philip Cusick considers a 25% upside ahead for Disney and has picked his coverage of its stock with an overweight rating and $135 price target.
According to the Wall Street Analyst, Disney+ has a “strong asset mix and what we expect to be a rapid decline in streaming losses in the next year.”
Since the return of Bob Iger as Chief Executive of Disney+, he has focused mainly on the media giant’s streaming profitability as video production companies became increasingly popular.
Because of this, Cusick believes Disney’s margins will only improve “as the company pares away what had become during COVID a bloated cost structure” with regards to Disney Media and Entertainment Distribution.
"[W]e would be surprised if Disney+ price increases didn't become an annual thing for a few years anyway," Cusick explained.
Even if Iger said it “isn’t necessarily the case” that Disney will buy it, Cusick remains optimistic.
"While CEO Iger has expressed in recent interviews that Hulu is less of a priority, we think this is posturing (similar to Comcast CEO Roberts saying in September he wanted to buy it), and that Disney still buys Comcast out of Hulu for the minimum $9 [billion]," the Wall Street analyst wrote.
Last week, Walt Disney Company broke records and exceeded Wall Street expectations when it reported that its theme parks made an estimated profit of $2.1 million – a 35% increase from 2021.