Macquarie: In The Content Wars, Disney 'By Far' The Most Likely To Succeed

It’s a small world in media. A small world ruled by a growing giant.

With Walt Disney Co (NYSE: DIS)’s concentrated channel buildout and consumption of Twenty-First Century Fox Inc (NASDAQ: FOXA), the U.S. media ecosystem is shifting. 

The Rating

Macquarie Research analyst Tim Nollen upgraded Disney from Neutral to Outperform and raised the price target from $112 to $125.

The Thesis

Disney is well-positioned with its core theme parks, Marvel- and "Star Wars"-producing film studios, diverse distribution platforms and IP concentration, Nollen said in a Tuesday note. (See the analyst's track record here.) 

“We firmly believe Disney has the right formula for growth into the future and will become an aggregator of consumers’ entertainment spend into the future,” Nollen said. 

The Fox merger only improves Disney's prospects, preparing the Mouse to capitalize on industry shifts from ad-driven to paid content, he said. Disney’s post-purchase portfolio, including Europe’s Sky brand, will catalyze international growth while driving the scaling of linear and over-the-top distribution, the analyst said. 

The circumstances also improve Disney’s potential to seize MLB, NHL and NFL rights for the 2022-23 seasons.

“In an increasingly concentrated space where content is still king but now requires direct-to-consumer distribution, Disney has by far the highest chance of success, in our view,” Nollen said. 

Price Action

At the time of publication, Disney was trading up 3.60 percent at $111.68. 

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