News
Stocks fall from recent records, Bitcoin returns above $70,000
Disney (DIS) shares rose more than 2% Monday after another rally on Wall Street.
Barclays analyst Kannan Venkateshwar upgraded the stock to Overweight from Equal Weight and raised his price target on the shares to $135 from $95 previously. The move implies upside of around 15% based on current stock levels trading around $120 per share.
Venkateshwar argued that free cash flow and earnings guidance are better than expected, along with “tactical tailwinds” such as Hollywood strikes, The consolidation of Hulu, AND cost cutscontributed to strengthening investor confidence.
Meanwhile, “the propensity of media investors to take long positions in Disney has led the stock to significantly outperform broader markets this year, at a faster pace than expected.”
The stock has been on a tear since the start of the year, up more than 30% versus the S&P 500’s 10% rise over the same period.
This is a significant turnaround for the company after the decline in its share price multi-year minimums last year.
The media giant has been grappling with challenges that include a declining linear TV business, slower growth in its parks business and losses in its streaming business. A heated proxy battle with activist investor Nelson Peltz also dimmed the company’s prospects.
But Venkateshwar says Disney’s next phase “could have a bigger impact as a number of turnaround elements still remain in the works and could manifest themselves more substantially starting next year.”
In his bullish case, the analyst said that streaming profitability ahead of schedule could serve as a tailwind for the stock price.
“We expect Disney streaming to break even potentially a quarter or two earlier than the company’s Q4 2024 guidance,” he explained. “This is partly driven by tailwinds from cost cuts in recent quarters and recent price increases.”
Venkateshwar said he believes Disney will likely achieve streaming margins “better than Netflix,” estimating potential margins in the 25% to 30% range, “which is not much different from where linear margins are today.”
Other “positive narrative surprises” could include ESPN streaming partners yet to be announced for his outstanding service, which will debut in the fall of 2025, as well as a refocus on long-term succession plans following the proxy battle.