Zinger Key Points
- Entertainment, theme parks, sports and DTC are key topics for Disney in its upcoming earnings call.
- A Disney analyst raises the price target on the future of DTC and earnings growth, but provides some short-term caution.
A Walt Disney Company DIS analyst sees sports, DTC and experiences offering hope and questions for investors when the company reports first-quarter financial results on Wednesday, Feb. 5.
The Disney Analyst: Goldman Sachs analyst Michael Ng reiterated a Buy rating on Disney and raised the price target from $137 to $139.
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The Analyst Takeaways: Disney could turn in an earnings per share beat in the fourth quarter thanks to better-than-expected results across several business units, Ng said in a new investor note.
Ng said Disney's EBIT for Experiences and Sports should be higher than consensus analyst estimates, but Entertainment EBIT could miss estimates.
The analyst said the box office performance for "Moana 2" and "Mufasa: The Lion King" could help boost content sales and licensing EBIT in the quarter.
For direct-to-consumer, the analyst forecasts flat Disney+ core net adds, which is higher than the consensus estimate of a decline of 1.0 million.
"Since its F4Q24 earnings report (11/14/24) where DIS introduced 3-yr forward guidance above-consensus estimates, DIS shares have outperformed the market," Ng said.
The analyst said investor sentiment on the theme parks demand recovery and growth outlooks are helping boost the shares.
Ng said the key investor debates for the first-quarter results will be Sports EBIT outlook with the planned Fall 2025 launch of the ESPN flagship DTC, the DTC outlook with the Hulu + Live TV and Fubo partnership and the experiences outlook.
The analyst noted that Disney's report comes after Netflix Inc NFLX reported better-than-expected fourth-quarter results and had its best ever quarter for net additions (+18.9 million).
Ng's forecast of flat Disney+ Core net adds comes due to an expected temporary increase in churn from price increases and the expiration of summer promotional activity.
"Looking ahead, we model +6.5 mn Disney+ Core net adds in F2025 driven by demand from an attractive pay-1 window for theatrical titles and the password sharing crackdown."
The analyst also highlighted the ESPN DTC launch, which still has question marks on pricing and early promotion. Ng said this could be a key item discussed by the company on future earnings calls.
"We view DIS as a high quality EPS compounder at an undemanding valuation."
DIS Price Action: Disney stock is up 1.2% to $110.12 on Thursday versus a 52-week trading range of $83.91 to $123.74. Disney stock is up 17% over the last year.
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