On Wednesday, Evercore ISI adjusted its outlook on Walt Disney shares (NYSE:DIS), reducing the price target to $128 from the previous $130 while maintaining an Outperform rating. The revision follows Disney's second-quarter earnings, which showed in-line revenue and exceeded expectations in segment operating income, adjusted earnings per share (EPS), and free cash flow (FCF). Additionally, Disney raised its adjusted EPS guidance for fiscal year 2024.
Despite these positive indicators, Disney's stock experienced a 10% decline against a flat market trend. The drop is attributed to investors repositioning after Disney had become a popular investment in recent months. Concerns were also raised about the prospect of normalized demand at Disney's theme parks post-COVID and a moderated outlook for the third quarter. The company expects flat operating income in its Experiences segment, widening direct-to-consumer (DTC) losses, no subscriber growth for Disney+, and impacts on Sports profitability due to ICC sports rights.
The analyst from Evercore ISI acknowledged the concerns regarding theme park demand but believes that Disney's earnings potential remains largely unchanged from previous expectations. Adjusted EPS estimates for fiscal years 2024 and 2025 have been slightly revised from $4.87 and $5.65 to $4.80 and $5.60, respectively. The new fiscal year 2024 estimate is still ahead of the company's own guidance of $4.70.
The price target adjustment to $128 is based on a 23 times multiple of the adjusted EPS forecast for fiscal year 2025. Despite the recent sell-off and the lowered price target, Evercore ISI reaffirms its Outperform rating on Disney's stock, indicating a continued positive outlook for the company's performance.
InvestingPro Insights
As Walt Disney Company (NYSE:DIS) navigates the evolving landscape of entertainment and media, real-time data from InvestingPro provides additional context for investors considering the stock. The company's market capitalization stands at a robust $193.32 billion, reflecting its status as a prominent player in the industry. Despite recent market volatility, Disney's price-to-earnings (P/E) ratio has adjusted to 45.47 over the last twelve months as of Q2 2024, suggesting a high earnings multiple that investors should be mindful of.
InvestingPro Tips highlight that while Disney is expected to see net income growth this year, analysts have revised earnings downwards for the upcoming period. Additionally, Disney operates with a moderate level of debt and has experienced a significant price uptick over the last six months. With this mixed financial outlook, Disney's strategic moves will be crucial in maintaining its market position.
For those interested in a deeper analysis, InvestingPro offers further tips on Disney's financial health and market prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the 6 additional InvestingPro Tips that could inform your investment strategy.
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