Disney can’t escape legacy media pressure even as streaming service takes off No ratings yet.

Disney+ needed just a couple months to amass nearly half the number of subscribers that Netflix Inc.

NFLX, -0.59%

  has domestically, but that disclosure didn’t help Walt Disney Co.’s stock Wednesday after the company’s latest earnings report.

Shares of Disney

DIS, -2.28%

 were off 1.8% in morning trading after the company beat earnings expectations but showed weakness in its legacy media category.

See more: Disney+ subscriptions have topped 28 million, earnings beat expectations

Bernstein analyst Todd Juenger said that his conversations with the buy side ahead of the report indicated that a Disney+ December-quarter subscriber count below 25 million would likely have driven Disney’s stock lower while a count about 30 million could have given shares a boost. The 26.5 million subscribers that Disney reported as of the December quarter was “squarely in the ‘fairly priced’ comfort zone,” he said, though “more important” was the company’s disclosure that it had 28.6 million subscribers as of earlier this week.

“While the sub adds pace has significantly slowed, churn has not driven a decline (yet),” he wrote.

Of course, the Disney story is about more than just streaming, and Juenger found the report to contain many puts and takes. On the plus side, Disney’s parks segment had what he referred to as its “best quarter in years.” Less encouraging was the performance from Disney’s legacy media networks, however, as linear ABC and ESPN showed advertising declines.

ESPN “is widely regarded as the last bastion of linear” television, he wrote, since there’s incentive to watch sports live even in the age of streaming, but Disney’s results indicated that “all of these TV networks [in the industry]—even ESPN—are facing tough advertising revenue pressure from a declining audience universe and audience engagement.”

Juenger rates Disney’s stock at market perform and lifted his target price to $141 from $138 after the report.

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Still, the results left Wells Fargo analyst Steven Cahall feeling like Disney could get a “kick-start” to investor sentiment that had been “perplexingly tepid” since Disney+ launched in early November.

“Angsts included perhaps-too-high [subscriber] expectations, post-‘Mandalorian’ churn risk, cable cord-cutting, Studio comps and international parks,” he wrote. “We think F1Q20 results put a lot of fears to bed, while most importantly showcasing the strong runway ahead for Disney+.”

Cahall is encouraged by the runway for Disney+ as the company plans for European and Indian launches. He also said that concerns about the core business seemed “overdone” as park attendance and per capita spending rose while media networks affiliate revenue may have been flat or up on a sequential basis with renewals helping to offset cord-cutting issues.

He raised his price target on Disney’s stock to $180 from $175 while keeping an overweight rating on the stock.

“We think Disney is the best way to play the crowded direct-to-consumer (DTC) market. Great content and a modest [average revenue per user] should drive strong sub growth for the foreseeable future, which the equity market covets,” Cahall wrote. “More importantly, we don’t believe Disney is about maximizing streaming profitability—a fool’s errand given fragmentation—but rather it can use DTC for engagement that then drives monetization elsewhere.”

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JPMorgan’s Alexia Quadrani liked that Disney was transparent about Disney+ data points. She was encouraged by the growth in subscriber count after the December quarter ended and also Disney’s disclosure that average revenue per user for the service stood at $5.56, “dismissing concerns that much of the sub growth was notably discounted or free.”

Looking ahead, she expects further momentum for Disney+ as the company prepares to release “The Falcon and the Winter Soldier” in August, the second season of “The Mandalorian” in October, and “WandaVision” in December. Quadrani rates Disney’s stock at overweight while lifting her price target to $170 from $160.

MoffettNathanson’s Michael Nathanson was impressed that the company has nearly half Netflix Inc.’s domestic subscriber base in about three months, which “speaks to the unrivaled quality of their content, the strength of their brands and the magic of Disney’s marketing machine.” He also praised Chief Executive Bob Iger for setting Disney up to adapt to changes in the media industry.

“Rather than play the hackneyed short-term game of managing for quarterly earnings, he has courageously agreed to spend and do what was needed to re-position Disney for long-term success in the future,” Nathanson wrote. He rates Disney a buy with a $165 target price.

Disney shares have added 7.1% over the past three months as the Dow Jones Industrial Average

DJIA, +1.08%

 has risen 6.3%.

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