On Monday, Evercore ISI increased its price target on Walt Disney (NYSE:DIS) shares to $134 from $128, while keeping an Outperform rating on the stock. The firm based its decision on Disney's potential for earnings growth and recent positive guidance from the company's management.
Walt Disney's adjusted earnings per share (EPS) peaked at $7.08 in fiscal year 2018. Still, they fell to $2.02 in fiscal year 2020 amid various challenges, including significant investments in streaming, the rapid decline of linear Pay TV, creative slowdowns, COVID disruptions, and the Hollywood strikes.
However, with the recovery of Disney's Parks and a focus on direct-to-consumer (DTC) profitability, the adjusted EPS has improved, closing fiscal year 2024 at $4.97.
Disney's management has provided multi-year guidance that foresees high-single-digit growth in adjusted EPS for fiscal year 2025, implying approximately $5.30-5.45, and double-digit growth in both fiscal years 2026 and 2027. Utilizing the low end of management's targets suggests an EPS of $6.40 in fiscal year 2027, which matches pre-release consensus estimates.
The firm noted several positive aspects within Disney's targets, including attractive margin expansion guidance for Disney+/Hulu despite ongoing investments, the ESPN direct-to-consumer product not leading to a new phase of loss-leading investments, and expectations of healthy free cash flow growth in fiscal years 2026 and 2027.
Evercore ISI raised its price target based on 22 times its adjusted EPS estimate of $6.10 for fiscal year 2026. The analyst expressed that the narrative will simplify as Disney executes its outlook, highlighting the stock's opportunity to break out toward $150. The firm reiterated its Outperform rating, indicating confidence in Disney's trajectory.
In other recent news, several financial research firms have adjusted their outlooks on Walt Disney Co. following the company's Q4 earnings report and multi-year guidance. Major highlights include TD Cowen raising its Disney target to $123 while maintaining a hold rating.
This revision came after Disney's Q4 earnings slightly missed TD Cowen's estimates but matched the market consensus. The firm also revised its earnings per share (EPS) projections upward for fiscal years 2025 to 2027, based on Disney's unexpected EPS forecast.
Guggenheim maintained a buy rating on Disney's shares, increasing the price target from $110 to $130 based on Disney's robust EPS outlook and stronger performance in their Direct-to-Consumer (DTC) segment. Similarly, Morgan Stanley (NYSE:MS) and Loop Capital raised their price targets for Disney to $125, citing the company's growth plan driven by a content turnaround and increased experiential investments.
Meanwhile, Macquarie increased its price target from $91.00 to $110.00, maintaining a neutral stance. These adjustments follow Disney's announcement of high single-digit adjusted EPS growth in fiscal 2025, and double-digit growth in 2026 and 2027.
Despite near-term risks and valuation concerns, analysts express confidence in Disney's strategic moves and potential for sustained growth, especially in the Direct-to-Consumer business. These are the recent developments in Disney's performance and future outlook.
InvestingPro Insights
Recent data from InvestingPro aligns with Evercore ISI's optimistic outlook on Walt Disney (NYSE:DIS). The company's market cap stands at $208.4 billion, reflecting its significant presence in the entertainment industry. Disney's revenue for the last twelve months reached $91.36 billion, with a 2.77% growth rate, indicating steady expansion.
InvestingPro Tips highlight Disney's strong recent performance, with a significant 14.1% return over the last week and an impressive 28.87% return over the past three months. This aligns with the article's mention of Disney's recovery and positive management guidance. Additionally, analysts predict the company will be profitable this year, supporting the expectation of continued earnings growth.
The PEG ratio of 0.38 suggests that Disney may be undervalued relative to its growth prospects, which could support Evercore's increased price target. For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Disney, providing a deeper understanding of the company's financial health and market position.
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