UBS Analyst Lowers Price Target on Disney, Maintains Strong Buy Rating

UBS's John Hodulik lowered their price target on Disney (NYSE: DIS) by 7.1% from $140 to $130 on 2024/05/08. The analyst maintained their Strong Buy rating on the stock.

In their analysis of Disney's Q2 2024 earnings report, Hodulik noted that the results showcased "continued momentum in bottom line trends with DTC in the black and double-digit growth at Parks." They specifically highlighted Parks as a growth driver with underlying momentum and expressed optimism that DTC profitability would improve in FY 2025 through cost rationalization, the Hulu consolidation, and password sharing.

Despite acknowledging some mixed elements in the Q2 print and management's Q3 guidance, Hodulik affirmed that UBS's thesis for Disney remained intact. They believe that the company is on track to deliver a 20%+ three-year compound annual growth rate (CAGR).

Providing a breakdown of Disney's Q2 2024 performance, the company reported earnings per share (EPS) of $1.21, surpassing the Zacks Consensus Estimate of $1.12 and representing a substantial 30.1% increase over Q1 2023's EPS of $0.93. Revenue for the quarter stood at $22.08 billion, slightly missing the Zacks Consensus Estimate by 0.23% but surpassing Q1 2023's revenue of $21.82 billion by 1.2%. Additionally, Disney repurchased $1 billion in stock and declared a dividend of $0.45, a 50% increase compared to Q1's dividend.

Looking ahead to FY 2024, Disney's management provided guidance of 25% EPS growth, up from the previous guidance of 20% growth. They also expect to achieve free cash flow of $8 billion, beat the annualized cost target of $7.5 billion, and repurchase $3 billion in stock by the end of the year.

CEO Bob Iger expressed satisfaction with Disney's strong performance in Q2, highlighting the growth in the Experiences segment and the profitability of the streaming business. Iger also emphasized the positive results from the turnaround and growth initiatives implemented in the previous year, including highly anticipated theatrical releases, successful television shows, and the evolution of ESPN into a leading digital sports platform.

In addition to UBS's rating update, other analysts also revised their outlook on Disney on May 8, 2024. Vijay Jayant from Evercore ISI Group lowered their price target by 1.5% to $128 and maintained a Buy rating. Kannan Venkateshwar from Barclays lowered their price target by 3.7% to $130 and also maintained a Strong Buy rating.

It is worth noting that all top-rated analysts currently rate Disney as either a Strong Buy or Buy, with no analysts recommending a Hold or suggesting selling the stock.

The consensus forecast among analysts indicates that Disney's upcoming year will deliver earnings per share (EPS) of $1.76. If the analysts' prediction holds true, this would represent an 89.1% increase on a year-over-year basis.

Since the release of Disney's latest quarterly report on May 7, 2024, the stock price has remained unchanged. However, when comparing the stock's performance year-over-year, it has seen a modest increase of 2.4%. During the same period, Disney's performance has trailed behind the S&P 500, which has experienced a substantial 25.4% growth.

John Hodulik, the UBS analyst who updated their rating on Disney, is ranked in the top 48% of Wall Street analysts by WallStreetZen. Their average return stands at 0.1%, with a win rate of 51%. Hodulik specializes in analyzing the Real Estate and Utilities sectors, among others.

The Walt Disney Company, a mass media and entertainment conglomerate, is best known for its film studio, Walt Disney Studios. In addition to the studio, Disney owns and operates various divisions, including the ABC broadcast network, cable television networks, publishing, merchandising, music, and theater divisions. The company also offers direct-to-consumer streaming services such as Disney+, Star+, ESPN+, and Hulu. Founded in 1923, Disney is headquartered in Burbank, CA.

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