On Tuesday, Walt Disney Co. (NYSE:DIS) saw its price target increased to $128.00 from the previous $105.00 by Evercore ISI, while the firm maintained an Outperform rating on the stock.
The adjustment comes as the analyst anticipates a strong fourth-quarter fiscal year 2024 performance, driven by improving direct-to-consumer (DTC) profitability and robust studio segment results. This optimism is tempered by the expectation of weaker theme park results and minor impacts from the DIRECTV carriage dispute.
The analyst believes Disney's DTC segment is poised for topline growth that will significantly boost profitability in fiscal year 2025.
The projection is based on the annualized consensus estimates for Disney's DTC segment in the fourth quarter of fiscal year 2024, suggesting a year-end run-rate revenue/operating income (OI) of $25.7 billion/$755 million. This is in contrast to the broader market's expectation of $27.7 billion in revenue and $1.01 billion in OI for fiscal year 2025.
Despite concerns regarding costs due to ongoing investments in content and technology, as well as uncertainties surrounding the financial impact of ESPN's DTC product launch, the analyst views the projected $250 million increase in OI against a $2 billion rise in revenue as achievable, or even conservative. This outlook suggests confidence in Disney's ability to manage costs and leverage revenue growth effectively.
The analyst also highlighted the company's theatrical slate, which is expected to be particularly strong in the first half of the year, contributing to growth in the Content Sales, Licensing and Other (CSLO) segment. However, the theme parks' performance is predicted to be muted, with improvements anticipated throughout the year.
In summary, Evercore ISI's update on Disney's stock reflects a positive view of the company's future earnings potential, particularly in the DTC and studio segments, despite some anticipated challenges in other areas of the business. The new price target of $128.00 represents the firm's confidence in Disney's strategic direction and financial prospects.
In other recent news, Walt Disney Co. has launched a new business unit focused on AI and augmented reality technologies. The Office of Technology Enablement, led by Jamie Voris, seeks to integrate these advancements across Disney's divisions, including film, television, and theme parks. This initiative follows a task force formed to explore AI applications throughout the company.
In analyst news, Piper Sandler maintained a Neutral rating on Disney, highlighting mixed trends within the company's experiences business and positive momentum in the Disney+ streaming service. Analysts at Goldman Sachs (NYSE:GS) also reaffirmed their Buy rating on Disney, despite potential disruptions to the Parks and Experiences segment's EBIT due to an impending hurricane.
In leadership changes, Disney named James Gorman, a Morgan Stanley (NYSE:MS) veteran, as its board chairman starting from 2025. Gorman, who will relinquish his role at Morgan Stanley at the end of 2024, is also leading the committee responsible for selecting Disney's next CEO.
These are some of the recent developments in the company, providing investors with an insight into Disney's strategic direction and operational focus.
InvestingPro Insights
Recent data from InvestingPro adds depth to Evercore ISI's optimistic outlook on Walt Disney Co. (NYSE:DIS). The company's market capitalization stands at $183.16 billion, reflecting its significant presence in the entertainment industry. Disney's revenue for the last twelve months as of Q3 2024 reached $90.03 billion, with a modest growth of 2.53% over the same period.
InvestingPro Tips highlight that Disney's net income is expected to grow this year, aligning with Evercore ISI's projections of improved profitability, particularly in the DTC segment. This expectation is further supported by the company's PEG ratio of 0.34, suggesting that Disney may be undervalued relative to its earnings growth potential.
While the analyst report focuses on specific segments, InvestingPro data shows that Disney's overall EBITDA growth for the last twelve months as of Q3 2024 was an impressive 28.83%, indicating strong operational performance across the business. This robust growth could provide additional support for the company's investment in content and technology, as mentioned in the analyst's report.
It's worth noting that InvestingPro offers 11 additional tips for Disney, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable when considering the stock's potential in light of the new price target set by Evercore ISI.
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