BofA raises Disney stock target on strong park, DIS+ growth

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Written By Pinang Driod

On Monday, BofA Securities maintained its Buy rating on Walt Disney (NYSE:) shares and increased the price target from $130.00 to $145.00. The firm predicts that Disney’s second fiscal quarter (F2Q) will showcase ongoing strong momentum, similar to the first fiscal quarter (F1Q).

The performance of Disney’s parks is highlighted as a significant contributor, with expectations for operating income to see low to mid-teen growth during F2Q.

The recent Charter carriage agreement is projected to positively influence Disney+ (DIS+) subscriber numbers in the domestic market, with an estimated increase of 7.5 million net additions. However, international subscriber growth is expected to decline by 1.5 million due to recent price hikes.

Despite this, the company is on track to surpass its $7.5 billion cost savings goal and is confident that its direct-to-consumer (DTC) segment will achieve profitability by the fourth fiscal quarter (F4Q).

Disney’s cost-saving measures and a promising film lineup are anticipated to lead to a favorable free cash flow (FCF) trajectory. The company’s confidence in its DTC segment reaching profitability and the improved film slate are seen as key drivers for Disney’s strong year-to-date share performance.

This financial outlook suggests that Disney is well-positioned to continue its robust share performance moving forward.

InvestingPro Insights

As BofA Securities expresses optimism for Disney’s fiscal second quarter, real-time data and insights from InvestingPro also paint an encouraging picture for investors. The company’s market capitalization stands at a solid $223.36 billion, indicating its significant presence in the market. Although trading at a high earnings multiple with a P/E ratio of 75.06, the adjusted P/E ratio for the last twelve months as of Q1 2024 is more moderate at 44.46, suggesting that investors may be looking at future earnings potential.

InvestingPro Tips highlight that Disney’s net income is expected to grow this year, with 8 analysts having revised their earnings upwards for the upcoming period. This aligns with the positive outlook shared by BofA Securities. Additionally, the company has exhibited a strong return over the last three months, with a price total return of 35.52%, closely approaching its 52-week high, which may indicate a momentum that could interest growth-focused investors. For those looking to delve deeper into Disney’s performance and potential, InvestingPro offers more tips and insights on their platform. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a wealth of financial data and expert analysis, including several additional tips for Disney not listed here.

Considering Disney’s strategic initiatives and the positive indicators highlighted by InvestingPro, the company seems to be navigating its growth trajectory with promising prospects. The upcoming earnings report on May 8, 2024, will be a key date for investors to watch as it will provide further clarity on the company’s financial performance and future direction.

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