On Thursday, Jefferies initiated coverage on Walt Disney (NYSE:DIS) stock, assigning a Hold rating and setting a price target of $120.00. The entertainment giant, currently trading at $116.99 with a market capitalization of $211.86 billion, is showing strong momentum with a 30.17% year-to-date return. According to InvestingPro analysis, the stock appears slightly undervalued based on its proprietary Fair Value model.
The firm's analysis suggests that while Disney's direct-to-consumer (DTC) business is expected to achieve a significant operating margin improvement by fiscal year 2027, the current stock price likely reflects an anticipated recovery in the Parks segment's operating income growth.
Disney's Parks operating income is projected to return to a growth rate of 6-8% in fiscal year 2025, which represents 59% of the company's total operating income. With total revenue reaching $91.36 billion and EBITDA of $17.31 billion in the last twelve months, Disney maintains its position as a prominent player in the entertainment industry.
InvestingPro subscribers can access 12 additional key insights about Disney's financial health, which currently rates as GOOD based on comprehensive analysis. Over the next three to five years, Disney is forecasted to experience mid-single-digit revenue growth and high-single-digit operating income growth.
The Experiences and connected TV (CTV) advertising sectors, which are part of the DTC segment, are predicted to be the primary drivers of profit growth.
The firm is particularly positive about Disney's strategy in the DTC space, where the bundling of services and CTV advertising is expected to enhance operating margins from approximately breakeven in fiscal year 2024 to double digits by fiscal year 2027. However, other areas such as Sports and Linear Networks might negatively impact the company's overall performance, as the decline in linear television continues.
Jefferies points out that the market might be overly optimistic regarding the rate at which Linear Networks will decline, noting that their forecast for fiscal year 2027 is 9% lower than the consensus.
Following their scenario analysis, the firm believes that the risk-reward balance for Disney's stock is even, with a downside to upside skew of 0.8:1, indicating that the potential risks and rewards of investing in Disney are nearly equal.
The stock currently trades at a P/E ratio of 43.03, with analyst targets ranging from $63 to $140. For deeper insights into Disney's valuation and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, The Walt Disney Company (NYSE:DIS) has announced a 33% increase in its annual cash dividend to $1.00 per share, a significant rise from the previous year's $0.75 per share. The company reported annual revenues of $91.4 billion in Fiscal Year 2024, with a healthy gross profit margin of 35.75%.
Furthermore, Disney's latest release, "Moana 2," set a new record for the highest 5-day opening in cinema history, amassing a remarkable $221 million domestically and $386 million worldwide.
On the financial front, Evercore ISI increased its price target on Disney shares from $128 to $134, maintaining an Outperform rating, while TD Cowen adjusted its outlook on Disney, increasing the price target to $123 and maintaining a Hold rating. Similarly, Guggenheim maintained a Buy rating on Disney shares and increased the price target to $130.
These adjustments follow Disney's announcement of high single-digit adjusted earnings per share growth in fiscal 2025, and double-digit growth in 2026 and 2027. These are the recent developments in Disney's performance and future outlook.
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