Macquarie Analyst Raises Disney's Price Target by 10.6% After Q1 Earnings

By Don Francis, Editor
February 9, 2024 7:48 AM UTC
Macquarie Analyst Raises Disney's Price Target by 10.6% After Q1 Earnings

Macquarie's Tim Nollen raised their price target on Disney (NYSE: DIS) by 10.6% from $94 to $104 on 2024/02/08. The analyst maintained their Hold rating on the stock.

After reviewing Disney's Q1 2024 earnings, which were reported on February 7, 2024, Nollen decided to revise their price target for the company. According to the analyst, the quarter delivered an earnings beat and provided significant news that indicates long-term potential for Disney. Nollen also noted that Disney may be turning a corner and heading into the proxy battle from a position of greater strength.

In Q1 2024, Disney reported earnings per share (EPS) of $1.22, surpassing the Zacks Consensus Estimate by 25.77% and showing an increase of 23.2% compared to Q1 2023's $0.99. However, the company's revenue of $23.55 billion slightly missed the Zacks Consensus Estimate by 0.58%, although it did exceed Q1 2023's revenue of $23.51 billion.

Disney also revealed that it had 111.3 million Disney+ subscribers at the end of the quarter, a slight decrease from the previous quarter's 112.6 million. The company reported free cash flow of $886 million, down sequentially from $3.42 billion, but significantly improved compared to Q1 2023's $(2.155 billion). Additionally, Disney announced a new share repurchase program targeting $3 billion in repurchases for FY 2024, as well as a quarterly dividend of $0.45, representing a 50% sequential increase.

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

CEO Robert A. Iger expressed confidence in Disney's performance, 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." He emphasized the progress made in fortifying ESPN, building a profitable streaming business, reinvigorating film studios, and driving growth in parks and experiences. Iger believes that Disney's strong performance in various business segments sets the stage for significant growth and success, with opportunities to increase shareholder returns as earnings and free cash flow continue to grow.

In addition to Tim Nollen's rating update, several other analysts also revised their price targets for Disney on February 8, 2024. Bryan Kraft from Deutsche Bank raised their price target by 7.8% from $116 to $125, maintaining a Strong Buy rating on the stock. Kannan Venkateshwar from Barclays increased their price target by 8% from $88 to $95 while maintaining a Hold rating. Steven Cahall from Wells Fargo raised their price target by 11.3% from $115 to $128 and also maintained a Strong Buy rating.

According to the latest data, 87.5% of top-rated analysts currently rate Disney as a Strong Buy or Buy, while 12.5% consider it a Hold. No analysts recommend or strongly recommend selling the stock.

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

Since Disney's latest quarterly report on February 6, 2024, the stock price has risen by 11.3%. However, when comparing year-over-year, the stock is down 1.1%. During this period, Disney is trailing the performance of the S&P 500, which has declined by 21.4%.

It's worth noting that Macquarie analyst Tim Nollen is ranked in the bottom 7% out of 4,469 Wall Street analysts, with an average return of -19.2% and a win rate of 20.6%. Nollen specializes in the Technology, Communication Services, and Consumer Cyclical sectors.

The Walt Disney Company, founded in 1923, is a renowned mass media and entertainment conglomerate. Disney is known for its film studio, Walt Disney Studios, and operates various divisions, including the ABC broadcast network, cable television networks, publishing, merchandising, music, and theater. The company has also ventured into the direct-to-consumer streaming space, with platforms such as Disney+, Star+, ESPN+, and Hulu. Disney's headquarters are located in Burbank, CA.

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