Disney Analyst Sees Profit Growth Ahead With Streaming Gains, Park Recovery, Big Film Releases

BofA Securities analyst Jessica Reif Ehrlich maintained a Buy rating on Walt Disney Co DIS on Friday, with a price target of $140.

Near-term catalysts include profitability inflection in DTC, reacceleration in the Parks business, and a strong film slate that drives other businesses (DTC, Parks, and Consumer Products).

Reif Ehrlich projected that the fiscal second quarter of 2025 will reflect a sequential improvement in the Experiences segment’s operating income, which will subsequently accelerate in the third and fourth quarters.

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This will be aided by easier comps like inflation, the Paris Olympics, and the contribution of a new cruise ship (which is profitable in its first full quarter).

The Walt Disney Experiences segment is currently the largest contributor to operating income and cash flows and has been challenged recently by difficult comps, wage inflation, and preopening costs for new cruise ships. Recent macro uncertainty, alongside the opening of Universal’s Epic Universe, has only amplified concerns around the trajectory of the recovery in this segment, the analyst said.

Thus far, trends are tracking in line with expectations, with ancillary products such as Premier Pass showing signs of healthy demand (a positive contributor to yield).

In advertising, sports remains robust, while streaming video is still managed through the impact of increased supply in the market. The end of a wholesale deal with Canal+ will adversely impact streaming net adds, driving a sequential decline in net adds in the fiscal second quarter, according to the analyst.

Reif Ehrlich continues to expect DTC ARPU growth, although there could be a delayed impact of recent price increases given the mix of subscriptions and bundling.

Following strong fiscal first-quarter results, there was increased confidence in Walt Disney’s ability to hit, if not potentially exceed, their fiscal 2025 outlook.

While recent macro uncertainty adds risks, Reif Ehrlich did not see signs of underlying fundamentals coming under pressure. Moreover, while DTC will likely be an investment year, the analyst noted there will be discretion around the magnitude of spending and some benefits in DTC from recent price increases, password sharing, and a ramping advertising business.

For the fiscal second quarter, Reif Ehrlich maintained revenue of $23.4 billion and $1.25 for EPS. Additionally, she maintained fiscal 2025 revenue of $95.6 billion and EPS of $5.45.

Price Action: DIS stock is down 2.14% at $98.30 at last check Friday.

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