Investing.com -- Barclays analysts expressed optimism about Disney and Spotify (NYSE:SPOT) ahead of the Q3 2024 earnings season, identifying both as top picks.
The bank said in a note Wednesday that it believes the current market expectations for Disney are too low, providing a relative value opportunity, while Spotify is poised for continued revenue growth due to several key catalysts.
For Disney, Barclays highlighted that the company is likely to provide guidance for the next fiscal year, which could pleasantly surprise investors.
Although they acknowledged there is limited visibility due to factors like local theme park attendance and the uncertain macro environment, Barclays believes expectations of flat or down earnings per share (EPS) guidance are "overly conservative."
Instead, they expect Disney to guide for low to mid-single-digit growth, driven in part by tailwinds from the deconsolidation of its Indian business. A focus will also be on Disney’s ability to manage costs associated with its ESPN direct-to-consumer product and NBA rights.
Regarding Spotify, Barclays sees strong potential for growth through several catalysts, including new pricing tiers, label negotiations, and the possibility of a global price increase next year.
The bank notes that the recent price hikes in the U.S. and Canada will positively impact revenue, although next quarter’s growth could slow due to tougher year-over-year comparisons.
They added that the company’s operating income may be impacted by social costs tied to stock price movements, but overall, Spotify’s margins are expected to improve sequentially into Q4.
Both stocks are seen as strong candidates for upside, particularly if Disney guides above current expectations and Spotify continues to execute on its growth strategy, according to Barclays.