Can Disney's Experiences Segment Truly Bring The Magic Back For Investors?

Bank of America Securities (BofA) analyst Jessica Reif Ehrlich maintained a Buy rating on Walt Disney DIS with a price forecast of $140 on Friday, signaling confidence in the entertainment giant’s ongoing recovery, particularly within its crucial Experiences segment.

Reif Ehrlich projects a sequential improvement in the Experiences segment’s operating income (OI) for Disney’s fiscal third quarter, with an anticipated acceleration in the fiscal fourth quarter, supported by easier year-over-year comparisons.

This segment, a primary driver of Disney’s overall OI, has recently navigated challenges, including tough comparables, wage inflation, and significant pre-opening costs associated with new cruise ships.

Also Read: Disney Lifts Forecast With $1 Billion Streaming Goal, Abu Dhabi Park Deal And More

Adding to these headwinds were broader macroeconomic concerns and the impending launch of Universal’s Epic Universe, which had previously amplified investor anxieties regarding the segment’s trajectory.

However, the analyst notes a positive shift, indicating that the Experiences segment is now performing at least in line with fiscal 2025 expectations. This optimism is further bolstered by a robust pipeline of new cruise ships, which are expected to contribute significantly to results in the coming years.

In the advertising landscape, Sports remains a standout performer for Disney, demonstrating sustained strength relative to other categories. Furthermore, Reif Ehrlich expects Direct-to-Consumer (DTC) net subscriber additions to be modestly positive in the fiscal third quarter, aligning with the company’s own guidance.

Following a strong earnings beat last quarter, Disney raised its fiscal 2025 EPS guidance to $5.75. Reif Ehrlich believes this revised guidance is highly achievable, attributing this confidence to the fact that Disney’s prior earnings report coincided with peak uncertainty surrounding tariffs, which had previously obscured visibility.

Moreover, while DTC will likely be an investment year, she noted there will be some discretion around the magnitude of spend and momentum thus far in the parks (a key concern heading into the year), which should be positive for underlying fundamentals.

For the fiscal third quarter, Reif Ehrlich has slightly adjusted her estimates, lowering revenue to $24.0 billion (from $24.1 billion), OI to $4.33 billion (from $4.39 billion), and EPS to $1.39 (from $1.42).

These revisions are primarily due to the disappointing box office performance of Pixar’s Elio, which had a record-low opening for the studio.

Despite these near-term adjustments, the analyst has maintained her full fiscal 2025 OI estimate of $17.6 billion and EPS of $5.75, consistent with company guidance.

Price Actions: DIS stock is trading higher by 1.05% to $122.76 at last check Friday.

Read Next:

• Disney Parks Drive $67 Billion In US Economic Impact, Support Over 400K Jobs Nationwide

Photo by Bankrx via Shutterstock