Disney’s Earnings are in the Spotlight as Analysts Set a Positive Tone

Earnings season continues with another big name on Tuesday, as Disney report before the bell. With many of the market heavyweights having reported, eyes are now turning toward The Walt Disney Company.

Investor optimism appears to be on the rise, as reflected in Deutsche Bank's updated stance on Disney stock (NYSE:DIS). Analyst Bryan Kraft has adjusted his price target for Disney shares from $125 to $130 while maintaining a ‘Buy' rating, indicating a potential 10% upside from the current stock levels. This revision underscores confidence in Disney's robust earnings potential and prevailing valuation multiples.

Kraft's analysis suggests that Disney is poised to sustain its forward-looking P/E ratio based on the 2024 fiscal year estimates, with a forward shift into 2025. The analyst cites strong earnings growth as the core reason for this stability, coupled with a low likelihood of negative adjustments to earnings forecasts.

Investors are zoning in on several crucial performance indicators as Disney's earnings announcement approaches. Paramount among these will be the visitation rates at Orlando's theme parks and whether revenue growth from domestic parks can continue its upward trajectory, especially as the company approaches the end of a challenging comparative period in F2Q24.

Another focal point will be the performance of Disney+, particularly in terms of subscriber growth and average revenue per user (ARPU). The market will also scrutinise the company's proactive cost-cutting measures, which target over $7.5 billion in savings, and the successful amalgamation of Hulu with Disney+.

Adding to the list of awaited announcements is any new information regarding the potential sale of a minority stake in ESPN, which could form a significant strategic adjustment for Disney's extensive portfolio.

The consensus among analysts points to a strong conviction in Disney's stock prospects, rating it as a ‘Strong Buy.' Out of 28 analysts, 24 have given ‘Buy' ratings, 3 suggest ‘Hold,' and a solitary analyst recommends ‘Sell.' The average price target stands at $128.93, representing an anticipated one-year growth of 13.5%.

Report Comes In Below Expectations

• Streaming business timeline to profitability Q4
• Disney+ subscribers up 6% – 153.6mn, against expectations of 155.66mn
• Theme park revenue up 7% locally, 29% overseas
• Revenue $22.08bn, down from the expected $22.1bn
• Operating income $3.85bn, vs. $3.51bn
• EPS of $1.21 against consensus $1.10

Despite what is not a terrible report, DIS stock is trading down by 5.5% in the premarket, putting a stall on what has an absolutely stellar year for holders, up 28.40% through 2024 before the market session today.

We can expect more from analysts as the day progresses. In the meantime, we will have to make do with comments from Disney.

“Our results were driven in large part by our Experiences segment as well as our streaming business. Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4. Looking at our company as a whole, it's clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results. We have a number of highly anticipated theatrical releases arriving over the next few months; our television shows are resonating with audiences and critics alike; ESPN continues to break ratings records as we further its evolution into the preeminent digital sports platform; and we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.”

Disney CEO Bob Iger