BTIG analyst Richard Greenfield upgraded Walt Disney Co.’s stock to neutral from sell on Monday, ending a multiyear bearish call on the shares.
Greenfield was the most outspoken naysayer on Disney’s stock DIS, +0.21% since he deemed it a sell in late 2015, often taking to Twitter to express his frustration with management. He still has plenty of doubts about the company, and the upgrade seems to come through gritted teeth, amid general optimism on Wall Street for the direct-to-consumer efforts that Disney elaborated upon at an analyst day late last week.
“The end result is that consensus earnings expectations for Disney in fiscal 2021-2022 are far too high,” he wrote. “However, we doubt anyone is going to care for the next year, making it hard to find a near-term catalyst to support a sell rating.”
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He called out the company’s five-year target of 60 million to 90 million subscribers for its forthcoming Disney+ streaming service, which will serve as a rival to Netflix Inc. NFLX, -1.77% and the various other streaming offerings. “While it is nearly impossible to disprove a five-year projection for a service that has not even launched, Disney’s subscriber targets appear overly aggressive relative to the planned level of original programming investment (only $2.5 billion by 2024),” Greenfield wrote.
While Disney has a “hard-to-ever-replicate film slate” on tap for this year, that could make comparisons difficult come 2020, according to Greenfield. He’s also worried about ESPN’s contract renewal for Monday Night Football come 2021, which could prove very costly.
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Greenfield does give management some credit for recognizing that Disney needs to adapt to changing industry conditions. After Chief Executive Bob Iger spoke on CNBC last week, Greenfield determined that the CEO seemed better aware of “the need to put the consumer first versus historically putting business model/profits first.” Still, he doesn’t believe the company is doing enough.
Disney shares were up 0.6% on Monday, on pace to close at another record. The stock has gained 17% over the past three months, as the Dow Jones Industrial Average DJIA, -0.24% has risen 9.6%.
