Disney's Strong Buy Rating Maintained as Wells Fargo Analyst Raises Price Target

By Don Francis, Editor
February 9, 2024 7:47 AM UTC
Disney's Strong Buy Rating Maintained as Wells Fargo Analyst Raises Price Target

Wells Fargo's Steven Cahall raised their price target on Disney (NYSE: DIS) by 11.3% from $115 to $128 on 2024/02/08. The analyst maintained their Strong Buy rating on the stock.

Cahall's decision to increase the price target comes after reviewing Disney's Q1 2024 earnings, which were reported on February 7, 2024. The analyst expressed confidence in Disney's performance, stating that the company is "officially back on offense with the P&L humming and management's confident guidance, including 20% EPS growth in FY 2024 and a $3B stock buyback."

Furthermore, Cahall highlighted the potential for long-term growth, citing the combination of Disney's direct-to-consumer (DTC) segment, as well as its Sports and Experiences businesses.

The Q1 2024 earnings report showed positive results for Disney. The company reported an earnings per share (EPS) of $1.22, surpassing the Zacks Consensus Estimate by 25.77% and showing a significant increase of 23.2% compared to Q1 2023's EPS of $0.99.

Although Disney's Q1 2024 revenue of $23.55B slightly missed the Zacks Consensus Estimate by 0.58%, it still managed to surpass Q1 2023's revenue of $23.51B.

Disney's streaming platform, Disney+, continued to show strong performance with 111.3 million subscribers at the end of the quarter, although this figure was slightly lower compared to the previous quarter's 112.6 million subscribers.

The company also reported a free cash flow of $886 million, a decrease from the previous quarter's $3.42 billion but a significant improvement from Q1 2023's negative free cash flow of $(2.155 billion).

In terms of shareholder returns, Disney announced a new share repurchase program targeting $3 billion in repurchases for FY 2024. Additionally, the company increased its quarterly dividend by 50% sequentially to $0.45.

Looking ahead, Disney's management provided guidance for Q2 2024, expecting to add 5.5 million to 6 million net new Disney+ subscribers and highlighting ongoing positive momentum in average revenue per user (ARPU). For FY 2024, the company aims to meet or exceed its $7.5 billion annualized savings target, achieve an EPS of $4.60 (representing a 20%+ growth from 2023), and generate a free cash flow of $8 billion. Management also expects Disney's combined streaming businesses to reach profitability in Q4 2024.

CEO Robert A. Iger expressed confidence in Disney's future, stating, "Just one year ago, we outlined an ambitious plan to return The Walt Disney Company to a period of sustained growth and shareholder value creation." Iger highlighted the company's strong performance across its various businesses and emphasized the potential for significant growth and success.

In addition to Steven Cahall's rating and price target adjustment, other analysts also updated their ratings for Disney on February 8, 2024. Deutsche Bank's Bryan Kraft raised their price target by 7.8% from $116 to $125 and maintained their Strong Buy rating on the stock. Barclays' Kannan Venkateshwar raised their price target by 8% from $88 to $95 and maintained their Hold rating. Macquarie's Tim Nollen raised their price target by 10.6% from $94 to $104 and also maintained their Hold rating.

Currently, 87.5% of top-rated analysts rate Disney as a Strong Buy or Buy, while 12.5% see it as a Hold. No analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts suggests that Disney's upcoming year will deliver an earnings per share (EPS) of $2.56. If these analysts' predictions hold true, Disney's next yearly EPS will increase by 56.2% on a year-over-year basis.

Since the release of Disney's latest quarterly report on February 6, 2024, the stock price has increased by 11.3%. However, when compared to the previous year, the stock is down 1.1%. During this period, Disney has been trailing the performance of the S&P 500, which has experienced a decline of 21.4%.

Wells Fargo analyst Steven Cahall, who raised the price target on Disney, is ranked by WallStreetZen in the top 16% out of 4,469 Wall Street analysts. Cahall has an average return of 5% and a win rate of 49.1%. The analyst specializes in the Technology and Communication Services sectors.

The Walt Disney Company, founded in 1923 and headquartered in Burbank, CA, is a renowned mass media and entertainment conglomerate. The company is widely recognized for its film studio, Walt Disney Studios, and owns and operates various divisions, including the ABC broadcast network, cable television networks, publishing, merchandising, music, and theater. Disney has also made significant strides in the direct-to-consumer streaming space with platforms such as Disney+, Star+, ESPN+, and Hulu.

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