Lucy Nieves
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Disney Investors: Stop Worrying About ESPN

Credit Suisse's Omar Sheikh maintained an Outperform rating for Walt Disney Co , with a price target of $130. He pointed out that the company had options to offset the potential deceleration of growth at ESPN.

Analyst Omar Sheikh said that the “increasingly consensual” expectation of ESPN's growth slowing substantially does not take into account the impact of two defensive strategies that Disney could employ.

“First, DIS can reduce the likely significant usage of shared passwords for WatchESPN, where probably several million users consume the content without paying for it. Second, DIS can use its rights portfolio to create an unbundled product either with niche content aimed at "super-fans"; or for a fuller bundle of content to serve the casual sports fan,” Sheikh wrote.

The Credit Suisse report highlighted the flowing datapoints on ESPN:

  • Although domestic subscribers declined again in Q1, the rate of decline improved sequentially
  • Subscribers had increased since the end of Q1
  • Underlying advertising growth came in at 14 percent, with strong scatter pricing, and a significant improvement in the outlook for the upfronts
  • Operating income growth was at 8 percent, ex-sports cost phasing and FX.