Disney Analyst Re-Rates Stock Citing Momentum In Parks & Experiences Combined With Upcoming Wakanda Forever

Morgan Stanley analyst Ben Swinburne maintained an Overweight on Walt Disney Co DIS with a $125 price target.

Swinburne estimates that growth at the Parks & Experiences (DPEP) segment, combined with streaming flipping from losses to profits, will lift Walt Disney Co DIS adjusted EPS back above peak levels in FY25. 

The above theory supports roughly 40% upside in shares over the next two years (about 20x his ~$7.25 EPS), or his price target discounted back to fiscal YE23, he mentioned on a Wednesday noted titled "Disney Co: Wakanda Forever – Reiterate O."

The $160 bull case assumes the upper end of Disney's streaming targets are achieved, re-rating its media business (DMED). At the same time, DPEP growth remains robust as economic headwinds fade, delivering nearly $9 of adjusted EPS in '25. 

The $75 bear case assumes a recession weighs on DPEP earnings, which dip in FY23 while streaming targets are missed and shares overall de-rate. 

A higher DPEP earnings outlook helps offset higher anticipated streaming losses, keeping Swinburne's adjusted EPS outlook essentially unchanged. 

Recent price increases at US theme parks could support an upside to his expectations for stable per-cap spending in FY23. Swinburne expects DTC segment OI losses of $2.6 billion in FY23.

Swinburne cut F4Q adjusted EPS to roughly $0.50 after factoring in more significant DTC segment OI losses, Hurricane Ian's impact on the Parks, pressure at content sales from licensing run-off, and an elevated tax rate. He estimated 7.5 million core Disney Plus net additions. 

Price Action: DIS shares traded higher by 0.81% at $105.86 on the last check Thursday.