Blue-chip stocks are investment elites, offering stability, growth, and reliability with a solid track record of performance and resilience. The Walt Disney Company (DIS) stands out as a prime example, with iconic brands and blockbuster movies that are leading the entertainment industry's boom.
With the movies and entertainment market poised to hit $169.7 billion by the decade's end, Disney's stock could be a prime investment. The stock just earned a new bull note from JPMorgan (JPM) fueled by Inside Out 2's impressive performance, with the $135 price target suggesting nearly 40% upside potential.
This high-profile endorsement follows insider James Gorman’s purchase of 20,000 shares on May 8, signaling strong confidence in Disney's future, which looks brighter than a Pixar premiere. With DIS stock climbing from a "Moderate Buy" to a "Strong Buy" consensus rating on Wall Street over the past two months, it's time to take a closer look at this entertainment powerhouse.
About Walt Disney Stock
The Walt Disney Company (DIS), based in Burbank, California, is a global entertainment giant. From timeless classics to blockbuster hits, Disney's studios - Pixar, Marvel, and Lucasfilm - fuel its vast content empire. Beyond movies like Inside Out 2, The Lion King, Frozen, and Star Wars, Disney's expansion into streaming - challenging rivals like Netflix, Inc. (NFLX) and Amazon (AMZN) Prime Video - underscores its industry influence.
With a market cap of $176.8 billion, Disney's empire spans theme parks, merchandise, and television, captivating global audiences. As a cultural icon, Disney continues to innovate, creating experiences that resonate across generations, solidifying its place as a cornerstone of entertainment worldwide.
Disney’s journey has been a rollercoaster this year, with the stock down 21.9% from its late-March highs of $123.74. Prior to that, through the first quarter, DIS was the best-performing Dow stock of 2024. Shares of the entertainment giant have since pared their YTD gain to just 7.5%.
The company resumed its dividend last year after a three-year break, paying $0.30 per share in January. On Feb. 7, it boosted the semi-annual dividend by 50% to $0.45, translating to a 0.77% yield.
The stock currently trades at 1.99 times sales, cheaper than its close competitor Netflix’s 8.76x, and also below its historical average of 3.14x. Its forward price/earnings ratio of 20.49x is also lower than NFLX's 37.44x and its own five-year average of 42.63x.
Walt Disney Beats Q2 Earnings Estimates
On May 7, DIS reported its fiscal Q2 earnings results – which topped Wall Street’s forecasts on the bottom line, but missed on revenue. While revenue increased 1% annually to $22.1 billion, EPS of $1.21 jumped 30%, topping estimates by 8%.
Disney countered its shrinking TV broadcasting unit with booming growth in theme parks and digital entertainment. Disney+ and Hulu shined, gaining subscribers and moving toward profitability. Disney+ Core subscribers jumped by 6.3 million in Q2. Financials were strong, with cash flow more than doubling to $5.9 billion over six months and total segment operating income rising 22% to $7.7 billion.
Disney’s Experiences business surged in Q2 with 10% revenue growth, a 12% operating income boost, and a 60 bps margin hike. Q3 looks stable compared to last year, but management still foresees strong full-year growth. Core Disney+ subscribers are not expected to increase, but Disney expects its streaming segment to turn a profit by Q4, with even better profitability in fiscal 2025.
Looking ahead, Disney projects full-year adjusted EPS growth of 25% and is on track to generate $8 billion in free cash flow in fiscal 2024.
Analysts tracking Walt Disney expect the company to report a profit of $4.75 per share in fiscal 2024, up 26.3% year-over-year, with continued growth to $5.50 per share in fiscal 2025.
James Gorman’s Big Bet
James Gorman, executive chair of Morgan Stanley (MS) and a Disney board member, made waves on May 8 by buying over $2 million worth of Disney stock. This significant insider buy was Disney’s first this year, and came shortly after Disney’s Q2 earnings report, as investors sent the stock down 9.5% in one session in response to its revenue miss.
As Disney battles in the “streaming wars” against Netflix, Amazon, and Apple (AAPL), Gorman’s big stock buy - the largest insider purchase on DIS since the Michael Eisner era - highlights his confidence in the entertainment giant’s future, despite recent revenue challenges.
What Do Analysts Expect for Walt Disney Stock?
Recently, JPMorgan reiterated its “Overweight” rating on DIS, spotting a creative turnaround at the box office. The firm also backed its target price of $135, implying expected upside of nearly 39%, and raised estimates for Disney’s upcoming earnings report.
DIS stock’s Q2 post-earnings pullback was “overdone,” according to analyst David Karnovsky, who calls the box office success of Inside Out 2 a "positive indicator... even as we think investors still want to see execution on original IP."
Karnovsky remains bullish on Disney’s long-term outlook, citing investments in experiences, upcoming cruise launches, and favorable comps at Walt Disney World.
The analyst raised his segment operating income projections for the current quarter, to be reported on Aug. 14, by 0.5% to $3.87 billion, though the EPS view remains unchanged due to slightly higher corporate expenses. For the full year, JPMorgan projects a 20.5% rise to $15.5 billion in segment income and a 25% EPS boost to $4.73.
DIS stock has a consensus “Strong Buy” rating, a step up from the “Moderate Buy” rating of two months before. Out of the 27 analysts offering recommendations for the stock, 18 are bullish with a “Strong Buy,” four advise a “Moderate Buy,” and the remaining five analysts are cautiously sticking with a “Hold” rating.
The mean price target of $127.42 suggests an upside potential of 31.2% from the current price levels. The Street-high target price of $145 for Walt Disney, shared by Needham and Bank of America, implies the stock could rally as much as 49.2%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
