Disney Analyst Raises Earnings Estimate, Says Investors Underappreciate Theme Park Recovery

After a rough couple of years for Walt Disney Co DIS theme parks, one Disney analyst said Monday that the theme park recovery is just getting started.

The Analyst: Bank of America analyst Jessica Reif Ehrlich reiterated her Buy rating and $191 price target for Disney.

Related Link: 'Bringing Back The Magic': 4 Disney Analysts React To The Mouse's Q1 Beat

The Thesis: Ehrlich said Disney's theme parks will drive its earnings recovery in fiscal 2022. In fact, Ehrlich raised her 2022 EPS estimate from $4.18 to $4.26, noting Disney's theme parks business will be the company's largest potential source of leverage in the near-to-intermediate term. Even with some park restrictions and closures still in place, including in Shanghai and Hong Kong, Ehrlich said investors don't seem to fully appreciate the operating leverage potential of Disney's parks business.

"Absent a resurgence of COVID cases/lockdowns or additional shocks in the macro environment (e.g. inflation, recession), we believe the PECP segment remains well positioned to see significant operating leverage as capacity increases," she said.

Ehrlich is projecting Disney+ subscriber growth will reach trough levels at around 5 million net adds in the fiscal second quarter before a large slate of new content drives a reacceleration of subscriber growth in the second half of the year.

Ehrlich said theme park recovery, streaming service rollouts in new markets, increased streaming content outputs, price increases and ESPN sports betting options are too many bullish catalysts for investors to ignore.

Benzinga's Take: Disney shares have lagged the S&P 500 significantly in the past year, even though its streaming services continue to grow and its parks and movie studio business are on track for a full pandemic recovery. The company reported a big first-quarter earnings beat in February, and Ehrlich isn't the only analyst that's optimistic about the company's recovery potential in 2022.