Benzinga | Dec 20, 2021 03:50PM EST

Is Now The Right Time To Buy Disney? Why BofA Analyst Says Stock Is Heading Higher

A Bank of America analyst has reiterated a Buy rating and a $191 price objective for the Walt Disney Co. (NYSE:DIS), citing perceived disappointments in the company's theatrical releases while expressing optimism for its Disney+ streaming service and near-future attendance at its theme parks.

On The Small Screen: In a new paper, BofA research analyst Jessica Reif Ehrlich stated Disney "remains well positioned for the recovery, driven by a continued increase in capacity at theme parks and an improving content slate in 2HFY22." She estimated Disney+ will add 7 million new subscribers thanks to content additions including "The Beatles: Get Back," "Hawkeye" and the upcoming "Boba Fett," along with the streaming presentation of its popular theatrical films "Jungle Cruise" and "Shang-Chi and the Legend of the Ten Rings."

She also opined that the popularity of "The Beatles: Get Back" could spur Disney to diversify its content "beyond their traditional brands" in order to bring in more Disney+ subscribers.

On The Big Screen: In the current weekend's theatrical release slate, Disney has four films among the top 10 grossing movies in U.S. theaters; it also has a co-financing and profit-sharing agreement with Sony Pictures (NYSE:SONY) for the current box office champ, "Spider-Man: No Way Home," which Sony is releasing.

However, Ehrlich wrote that the Disney "theatrical releases during the quarter disappointed, likely due to the surging Omicron variant. As a result, DIS will once again be forced to re-evaluate their film release strategy for 2022. We believe the success of Disney+ is a key tenet of the bull thesis, and if the box office remains depressed, films could be utilized as an important subscriber acquisition tool for DIS+."

Related Link: Omicron Found In Wastewater At Florida County Home To Disney And Universal Parks

In The Theme Parks: Looking at the Disney theme parks operations, Ehrlich anticipated the first quarter of 2022 "will reflect signs of improvement in attendance," noting the omicron variant of the coronavirus has yet to have "a significant impact on attendance thus far."

She also predicted that "improving operating leverage in the parks" will offset "incremental headwinds in content sales/licensing" created by a lack of political advertising, increased costs for NFL and college football and lower international channels.

In The Near Future: Looking forward, she forecasted a FYQ1 EBIT of $1.52 billion and earnings per share of 37 cents, up from a previous forecast of $1.50 billion and 35 cents. However, she also cautioned that potential risks await the company, including "a significant slowdown in ESPN's growth due to cord cutting, weakened consumer confidence and softer theme park attendance, advertising weakness due to softer audience delivery and/or economic conditions and/or film flops and poor execution with respect to the 21CF integration."

Photo: Michael Gaida / Pixabay