Morgan Stanley Upgrades Walt Disney (DIS) to Overweight

(Updated - January 30, 2017 3:16 AM EST)

Morgan Stanley upgraded Walt Disney (NYSE: DIS) from Equalweight to Overweight with a price target of $124.00 (from $101.00).

Analyst Benjamin Swinburne comments "We forecast total cable affiliate revenue growth to improve from +2% in FY16 (adjusted for 53rd week comp but including currency headwinds) to +5% CAGR in FY17-FY20E (ACC Network currently not included in our forecast), pushing our overall estimates above consensus beginning in '18. We see both rate and volume opportunities: On volume - new streaming offers have the potential to drive incremental pay-TV penetration into the 15-20mm broadband-only base, particularly given the initial price points appear significantly discounted to existing pay-TV bundles. Following ~2% annual subscriber erosion at ESPN over the last three years, we believe risk now skews to the upside. We believe the combination of moderating skinny bundle headwinds and the emergence of new, low-priced streaming options create opportunities for incremental ESPN distribution. On rate - ESPN will enter a renewal cycle with distributors (MVPDs) beginning in CY18 with the impact building into '19 and '20, and we continue to believe it has pricing power relative to consensus expectations. We also believe new entrants (such as Hulu Live or YouTube Unplugged) will pay premium affiliate fees, suggesting a positive mix shift tailwind to rate."

For an analyst ratings summary and ratings history on Walt Disney click here. For more ratings news on Walt Disney click here.

Shares of Walt Disney closed at $109.30 Friday.

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