Disney price target raised by Morgan Stanley on streaming push and vaccine news

Published Thu, Nov 12 20208:35 AM ESTUpdated Thu, Nov 12 202010:53 AM EST

(This story is for CNBC Pro subscribers only.) A potential Covid-19 vaccine paired with Disney's aggressive push into streaming spurred Morgan Stanley to get more bullish on the media giant. The Wall Street firm — which has an overweight rating on the stock — hiked its 12-month price target on Disney to $160 per share from $135. Disney rallied 8% this week, past the previous target, on Pfizer/BioNTech 's breakthrough announcement about their vaccine candidate . Disney's stock closed at $137.82 per share on Wednesday. "With a supersized global streaming push and (hopefully) a vaccine ahead, we are confident F21 will be trough earnings," Morgan Stanley analyst Benjamin Swinburne said in a note to clients Thursday. Shares of Disney are still down about 4% in 2020 as the coronavirus pandemic forced the theme park operator to shut its parks, its biggest profit driver . Disney also faced movie theater closures, film and TV production shutdowns, docked cruise ships and the suspension of most live sporting events. However, Disney's stock has rallied more than 13% since announcing it is restructuring its media and entertainment divisions, as streaming becomes the most important facet of the company's media business. To accelerate its direct-to-consumer strategy, Disney is centralizing its media businesses into a single organization that will be responsible for content distribution, ad sales and Disney+. "We expect Disney to further lean into streaming, implying higher spend and more original content that moves more quickly to its DTC platforms," said Swinburne, referring to direct to consumer distribution. Morgan Stanley raised its streaming subscription estimates to 230 million by the end of 2025, with streaming revenues of $30 billion, a portfolio larger than Netflix has currently. The firm's outlook will require deeper streaming investment, which paired with a longer-than-expected Covid impact to theme parks, brings Morgan Stanley to lower near-term earnings estimates. "It will be a long, non-linear climb out of this investment/COVID earnings hole, but with success to date in streaming and recent vaccine news, our confidence has increased in it scaling to new heights," Swinburne added. While the U.S. advertising market has had a swift recovery from the pandemic, the surge in U.S. coronavirus cases forced Morgan Stanley to push out its expectations for Disney's theme parks to the second half of 2021 to the end of 2021. "The recent vaccine news gives us a greater degree of confidence that this is the last material cut to Parks estimates before a move towards normalization, however, and we have an increased degree of confidence in our expectation of reaching prior peak Parks earnings by FY23," said Swinburne. The firm added that it expects "ambitious plans" from Disney's investor day on Dec. 10. — with reporting from CNBC's Michael Bloom.

Attendees visit the Disney+ streaming service booth at the D23 Expo on August 23, 2019 at the Anaheim Convention Center in Anaheim, California.

ROBYN BECK | AFP | Getty Images

(This story is for CNBC Pro subscribers only.)

A potential Covid-19 vaccine paired with Disney's aggressive push into streaming spurred Morgan Stanley to get more bullish on the media giant.

The Wall Street firm — which has an overweight rating on the stock — hiked its 12-month price target on Disney to $160 per share from $135. Disney rallied 8% this week, past the previous target, on Pfizer/BioNTech's breakthrough announcement about their vaccine candidate. Disney's stock closed at $137.82 per share on Wednesday.