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Investing.com - KeyBanc has reiterated its Sector Weight rating on Walt Disney (NYSE:DIS) stock, while expressing a negative bias in its latest research note. The entertainment giant, currently valued at $209.5 billion, has shown resilience with a perfect Piotroski Score of 9 according to InvestingPro data, indicating strong financial health despite market challenges.
The firm’s analysis focused on Disney Cruise Line (DCL), operated by "The Magical Cruise Company," a Disney subsidiary in the United Kingdom (TADAWUL:4280). KeyBanc found that DCL’s fiscal year 2024 revenue exceeded pre-pandemic levels and represented approximately 7% of Disney’s Experiences segment revenue. This growth contributes to Disney’s overall revenue of $94.5 billion and healthy revenue growth of 5% over the last twelve months.
The research note highlighted that DCL contributed roughly 1 percentage point to the Experience segment’s growth in FY24. KeyBanc projects DCL revenue will approximately double from FY24 to FY26 due to the addition of two cruise ships, with the cruise line generating mid-to-high-teens yield.
Despite DCL’s growth trajectory, KeyBanc expressed concern that Domestic Experiences revenue may overstate Domestic Park growth. The firm expects competitive pressures to likely increase at Walt Disney World, with per capita spending likely to slow at Disneyland.
KeyBanc raised its FY26 Experiences capital expenditure forecast as a result of its analysis, while maintaining a view that consensus estimates either assume too much contribution from DCL into FY26 or not enough of a slowdown in underlying domestic parks performance.
In other recent news, Walt Disney reported stronger-than-expected fiscal third-quarter results, with a 2% year-over-year revenue growth and an 8% increase in operating income. This performance was primarily driven by the company’s Direct-to-Consumer and parks segments. Following these results, several analyst firms have reiterated their positive outlook on Disney. UBS maintained its Buy rating and a $138 price target, while Rosenblatt slightly raised its price target to $141, continuing to recommend a Buy. BofA Securities also reiterated its Buy rating with a $140 price target, noting the strategic acquisition of the NFL Network and the NFL’s 10% stake in ESPN. Loop Capital echoed these sentiments, maintaining a Buy rating with a $130 price target, emphasizing Disney’s growth potential. Additionally, ESPN, a Disney subsidiary, plans to launch a redesigned app next week featuring betting functionalities, including an ESPN Bet tab and tracking capabilities for live and upcoming bets. These developments highlight Disney’s strategic focus on expanding its digital and direct-to-consumer offerings.
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