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Disney poised for record high as 'Endgame' dominates box office

Apr 29 2019 15:25
Ryan Vlastelica, Bloomberg

Walt Disney shares rose in pre-market trading and are poised to open at a record high after the company’s "Avengers: Endgame" film shattered box-office records.

The success of the film prompted analysts to expect a much larger contribution from the studio division to the company’s overall profit, and it is also seen as a positive sign as the Dow component prepares to launch its Disney+ streaming service.

Beyond Disney, analysts also saw upside for theater companies.

Shares of Disney gained 1.6% before the bell, setting the stock up for its fifth straight daily gain, as well as its latest close in record territory.

Here’s what analysts are saying about the film’s success:

JPMorgan, Alexia Quadrani 

There is “no endgame in sight for Disney’s success”.

Raises full-year earnings estimate “largely on better expected performance at the Studio segment.” Price target raised to $150 from $137; overweight rating.

“We continue to see upside to shares” even after recent gains.

Rosenblatt Securities, Mark Zgutowicz 

“The global phenomenon of ‘Avengers: Endgame’ more broadly highlights the ever-increasing popularity of Marvel content, a cornerstone of the Disney+ offering.”

The film could make about $900 million more than Rosenblatt had expected.

Such “outperformance vs our expectations would generate an incremental ~$0.15 of earnings increasing 3Q19 EPS by ~8% and FY2019 by ~2%.”

Buy rating, $150 price target.

Cowen, Douglas Creutz 

Estimates that the film could add between 10 cents and 12 cents to this year’s earnings per share.

“More importantly ’Endgame’ will be on Disney+ when it launches and we think it will be one more big draw to get people to sign up.”

Outperform rating, price target raised to $154 from $131.

“It would be hard to argue that the underlying value of Disney’s content isn’t at least as high as [Netflix], and additionally this valuation framework doesn’t give Disney any credit for having a vastly deeper library.”

B. Riley FBR, Eric Wold 

The box office “sets a new bar,” and “Endgame” made $66 million more than the firm had expected.

Among theater-related stocks, favours Cinemark Holdings “on the expectation of improving Latin America trends,” and IMAX given “improving results out of China and a blockbuster-fueled film slate in 2019/2020”.

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