Goldman Calls Disney A Buy, 2018 Film Roster 'Might Be Best Ever'

Goldman Sachs analyst Drew Borst believes that despite the 9 percent outperformance over the past two months, Walt Disney Co DIS shares have 24 percent upside potential over the next 12 months, driven by accelerated EPS growth in FY 2018.

Borst upgraded the rating on Disney's stock from Neutral to Buy, while raising the price target from $109 to $134.

Stock Catalysts

The analyst believes there could be four key catalysts for the stock.

1. Walt Disney’s FY 2018 film state “might be its best ever,” Borst stated, while listing the four Marvel films, two Star Wars films and three animated films scheduled for the year, and the fact that several of them have “large consumer products opportunities”, especially Avengers and Start Wars Episode VIII.
2. The analyst also expects the ESPN headwinds to abate due to the normalization in NBA costs, as well as additional upside provided by “(a) stabilization in pay TV subs driven by new virtual MVPD services and/or (b) traction from the launch of the ESPN OTT service.”
3. In addition, major new part attractions are scheduled to start opening between CY 2017 and CY 2019, including Toy Story Land in Florida and Shanghai in CY 2018 and Star Wars Land in Florida and California in CY 2019.
4. “DIS would potentially benefit the most in the peer group from corporate tax reform,” Borst said, explaining that if the U.S. tax rate were lowered to 25 percent, Disney’s FY 2018 EPS could rise by 9 percent.

The stock was up more than 1 percent at $109.49 in Tuesday's pre-market session.