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Storms, Streaming And 'Star Wars': An Updated Disney Outlook

NFLX, DIS | September 8, 2017

Walt Disney Co (NYSE: DIS) is expected to take a hit from its considerable presence in Florida as Hurricane Irma closes in on the Sunshine State.

JP Morgan has lowered its fourth-quarter estimates on the media giant due to lower domestic parks revenue expected from the impact of colossal storm.

Unsurprisingly, Disney has seen cancellations in Orlando and has had to cancel three cruises due to the extreme weather bracing Florida and the Caribbean.

Disney management also spoke on its streaming initiatives, with ESPN streaming expected to launch in spring 2018 and its self-branded Netflix, Inc. (NASDAQ: NFLX) competitor service expected to launch in late 2019.

An official pricing announcement for the ESPN streaming service is expected early 2019.

The Disney-branded service will feature all of Disney’s first-run theatrical content, including films from Marvel and Lucasfilm, in addition to films and original content exclusive to the service.

The company has just announced it will make a clean break from Netflix regarding its Marvel and Lucasfilm content.

“We believe packing the content together with Disney’s other strong brands is likely to create a very compelling consumer offering with broad, high-quality content, which is increasingly important in a world with so many OTT choices,” said JP Morgan media analyst Alexia Quadrani.

When asked how much Disney’s new streaming service will help the company, JJ Kinahan, chief market strategist of TD Ameritrade said:

“It is a great opportunity because content is king and they have so many years of great quality content, and not only quality content but trusted content. Parents trust that if their kids go see a Disney movie it's going to be a good experience. They have a lot going for them in terms of how they're viewed. In my opinion they have an opportunity, if done right to be a big winner in that space.”

Despite the near-term distractions, Quadrani is more optimistic about Disney’s future long term. 2018 is shaping up to a be strong year for Disney's studio slate with four Marvel and two "Star Wars" films planned. The firm reiterated its Overweight rating but lowered its price target from $130 to $125.

“We continue to expect healthy longer-term earnings growth and view the company as one of the best-positioned media companies with an unparalleled portfolio of IP that we believe the company is setting up for greater long-term monetization," Quadrani concluded.