On Tuesday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on Walt Disney (NYSE:DIS) shares with a steady price target of $120.00, despite anticipating a negative financial impact from the imminent Hurricane Milton. The firm projects that Walt Disney World in central Florida will face disruptions due to the hurricane, which is expected to make landfall on October 9th.
The analyst from Goldman Sachs provided estimates of a $150 million to $200 million hit to the Parks and Experiences segment's EBIT for the first fiscal quarter of 2025 (F1Q25E) due to an anticipated 4 percentage point decline in domestic attendance growth.
The revised forecast stems from historical patterns observed with past hurricanes, such as Hurricane Irma in 2017, which resulted in a $100 million adverse effect on Disney's EBIT and a 3 percentage point drop in domestic parks attendance, including two days of closures at Walt Disney World and cruise ship itinerary disruptions.
Despite the expected impact, the analyst's estimates for the fourth fiscal quarter of 2024 (F4Q24E), released on September 24, 2024, remain largely unchanged. The firm continues to anticipate Disney to report F4Q24E earnings per share (EPS) of $1.16, which is higher than the Visible Alpha Consensus Data of $1.10, and segment operating income (OI) of $3.8 billion, aligning with consensus.
However, due to the anticipated impact of Hurricane Milton, the analyst has lowered the forecast for the Parks and Experience EBIT for F1Q25E, resulting in a reduced EPS estimate for the fiscal year 2025 to $5.14, down from the previous $5.22 and slightly above the consensus of $5.13.
The projections for fiscal years 2026 and 2027 remain essentially unchanged, averaging $5.96 and $7.10 respectively. The resilience of Disney's stock rating and price target amid potential natural disaster disruptions reflects Goldman Sachs' continued confidence in the company's financial performance.
In other recent news, the Philippines has introduced a 12% value-added tax on digital services offered by international tech firms such as Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Disney, and Alphabet (NASDAQ:GOOGL). This move, aimed at promoting fair competition, is expected to generate around $1.9 billion from 2025 to 2029.
Meanwhile, Charter Communications (NASDAQ:CHTR) plans to include NBCUniversal's Peacock streaming service in its Spectrum TV Select package at no additional cost, as part of a new multi-year agreement.
Raymond James has downgraded Walt Disney Co. from Outperform to Market Perform due to concerns about the near-term prospects of Disney's Parks segment.
Despite the downgrade, the firm acknowledged Disney's strong position in the transition from linear TV to streaming. In contrast, BofA Securities maintained a Buy rating on Disney, highlighting its robust portfolio and potential for growth.
JPMorgan (NYSE:JPM) revised Disney's earnings per share estimate to $1.09, primarily due to expected lower revenues in Linear Networks and Sports. However, Goldman Sachs reaffirmed its Buy rating on Disney, predicting the company will surpass earnings per share expectations for Q4 2024, largely due to strong performance in its Direct-to-Consumer segment.
InvestingPro Insights
To complement Goldman Sachs' analysis, recent data from InvestingPro offers additional context on Disney's financial position. The company's market capitalization stands at $167.78 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 is expected to see net income growth this year, aligning with Goldman Sachs' optimistic outlook despite the potential hurricane impact. The company is also trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.31, suggesting potential undervaluation.
While Goldman Sachs maintains a Buy rating with a $120 price target, InvestingPro's fair value estimate stands at $111.93, indicating there may still be room for growth from the current price. This assessment is supported by analysts' consensus fair value of $111.57.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Disney, providing a deeper understanding of the company's financial health and market position.
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