Raymond James initiated coverage of Walt Disney early Monday noting the Dow Jones entertainment giant is in prime position to navigate the transition from linear TV to streaming. The Dow Jones stock inched slightly lower Monday and is positioning to break a downtrend.
Raymond James started coverage of Disney stock with an outperform rating and a 97 price target, calling the Dow Jones company the "premier" stock to play in the streaming transition, according to a research note.
Media companies are grappling with the switch from profitable but declining linear, traditional television to the mostly unprofitable but growing streaming business. Disney's assets position it well to navigate the shift. Disney already has two scaled U.S. streaming services in Disney+ and Hulu, as well as its ESPN+ sports service. And the Dow Jones company's bundling plans help drive higher average revenue per account, lower churn and strong pricing power, Raymond James wrote.
The firm initiated coverage on Warner Bros. Discovery and Paramount Global early Monday, but appears more bullish on Disney.
Raymond James gave WBD stock an outperform rating with a 19 price target early Monday. Analyst Ric Prentiss noted the WarnerMedia and Discovery merger combined two complimentary streaming services with additional scale through the Max integration. Prentiss believes this should drive improved subscriber acquisition, fewer cancellations and strong pricing power.
The firm is more skeptical on Paramount's prospects, noting its still heavily exposed to linear TV with 54% of revenue from advertising and affiliate fees. Raymond James says it's on the sidelines given the company's exposure and lack of clarity on streaming profitability. Raymond James initiated coverage of PARA stock with a market perform rating and no price target.
Disney In Talks To Cut The Cord
Meanwhile, Disney is in early discussions to sell its ABC network and some of its linear TV assets, according to reports late last week. On Thursday, Bloomberg reported that the Dow Jones company was in early talks with local broadcaster Nexstar Media Group. On Friday, representatives for media mogul Byron Allen confirmed he made a $10 billion bid to buy ABC network, FX and National Geographic.
Disney reported late Thursday that it was open to strategic options for its linear assets, but made no decision on a potential sale. The company is in the midst of a restructuring effort aimed at reducing spending by $5.5 billion. The House Of Mouse also steadily raised the prices of its streaming services and cracked down on password sharing as its direct-to-consumer offerings operate at a loss.
Disney: A Lagging Dow Jones Stock
DIS stock dipped Monday after inching up as one of the few early bright spots in the Dow Jones Industrial Average.
Disney is close to reclaiming its 50-day moving average, which it has been attempting to do since May.
At about 92, the stock would be breaking a seven-month downtrend. That would mark a possible entry point for aggressive investors. As a Dow Jones stock, Disney has performed in the bottom half of the index this year, clocking a 1.5% decline through Friday's session.
But shares jumped 4.9% last week on the ABC sale discussions, marking its best weekly gain since late March.
Paramount stock fell 3.3% Monday after climbing 2.9% last week. WBD shares faded 1.5% Monday, after gaining 4.6% last week.
Nexstar eased 1.3% Monday. Shares fell 3.7% Friday for a 13.5% jump on the week.
Local broadcasting behemoth Sinclair rallied 19.8% last week despite falling nearly 10% Friday. Shares retreated 2% Monday.
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