Walt Disney plunges as Wall Street awaits better days for streaming profits
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Walt Disney (NYSE:DIS) reported fiscal second-quarter results that showed an improvement in its direct-to-consumer business, but Wall Street analysts said more progress is needed for investors to jump back in.
Wells Fargo analyst Steve Cahall, who has an overweight rating and per-share price target of $147 on Disney (DIS), noted that even though the company added fewer domestic subscribers than expected, profitability went up, as the average revenue per user came in at $7.14 per month, up 20% sequentially. That needs to extend to all of Disney's direct-to-consumer, or DTC, subscribers, however. 
"Investors are likely to remain neutral until DTC bottom-line visibility improve," Cahall wrote in an investor note.
Disney (DIS) shares fell more than 8% in early trading on Thursday, while other streaming and media stocks were also impacted as Warner Bros. Discovery (WBD), Paramount (PARA) (PARAA) and Roku (ROKU) also lost ground. 
Cahall added that with Hulu set to be integrated into Disney+ later this year (for existing subscribers of both services), the focus is solely on streaming and earnings. 
"The debates at DIS are playing out, but they feel tectonic in mass and velocity: ESPN one day going DTC; costs being aggressively rationalized; [Disney Parks, Experiences and Products] staying strong; and primarily where DTC profits/margins go, and when," Cahall explained, adding it is the firm's favorite long-term idea.
UBS analyst John Hodulik, who has a buy rating and a per-share price target of $122 on Disney (DIS), noted that "rationalization" of the company's streaming business has begun.
Bank of America analyst Jessica Reif Ehrlich said the results and conference call reaffirmed there is significant change underway at the company, but that the process is likely to take time.
"The presence of Bob Iger as CEO should support investor sentiment," Reif Ehrlich wrote, adding the company has near term catalysts such as additional updates on its strategic outlook, continued "robust" theme park demand and any sports betting optionality from ESPN.
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