On Wednesday, Goldman Sachs reaffirmed its Buy rating on Walt Disney (NYSE:DIS) shares, maintaining a price target of $120.00. The investment firm anticipates that Disney will surpass earnings per share (EPS) expectations for the fourth fiscal quarter of 2024, driven by a strong performance in its Direct-to-Consumer segment.
The analyst from Goldman Sachs highlighted the quarter's key themes, which include a significant increase in subscriber numbers for Disney's streaming services, challenges in the Experiences segment due to changing travel patterns and consumer sentiment, and a negative impact from affiliate fee disputes.
Walt Disney is expected to report a notable uptick in Direct-to-Consumer subscribers, adding 3.5 million net new customers to its Disney Core offerings. This growth is attributed to the popularity of the Disney+, Hulu, and Max bundle, as well as the release of "Inside Out 2" on Disney+ on September 25 and a promotional summer offer for Disney+. However, this positive trend is slightly offset by subscriber churn following anticipated price hikes.
The company's Experiences segment faces headwinds as a result of the ongoing normalization of travel following the pandemic and pressures on consumer sentiment. These factors may dampen performance in this area of Disney's business. Additionally, the firm is contending with a 200 basis point headwind in affiliate fees due to a blackout with DirecTV.
Looking ahead, Goldman Sachs provided directional guidance for Disney's fiscal year 2025, projecting an EPS of $5.22, which represents a 4% year-over-year increase. This outlook suggests a continued positive trajectory for the entertainment giant as it navigates various challenges and capitalizes on its strong content offerings and streaming services.
In other recent news, Walt Disney Co. has seen a series of significant developments. The company is set to phase out Salesforce (NYSE:CRM)'s workplace collaboration platform, Slack, following a major data breach that led to the unauthorized release of over a terabyte of Disney's data. This decision was disclosed by The Wall Street Journal, citing an internal memo from Disney's CFO, Hugh Johnston.
In a separate development, Disney and DirecTV successfully negotiated a new agreement, restoring access to popular sports and entertainment programming for over 11 million DirecTV subscribers.
This resolution ended a service disruption that began when the two companies could not agree on terms for renewing their previous contract. The restored programming includes widely-watched networks such as ABC and ESPN, owned by Disney.
Disney also led the Emmy race with a record number of nominations, thanks to three of the most-nominated series: "Shogun," "The Bear," and "Only Murders in the Building." This success is attributed to the leadership of Dana Walden, Disney's TV chief, and the 2019 acquisition of 21st Century Fox for $71 billion.
However, Wells Fargo recently removed Disney from its Signature Picks List, citing potential impact on earnings due to the increasing likelihood of a prolonged consumer recession, particularly within Disney's Parks segment.
Despite this, Disney's Overweight rating was maintained. Lastly, DirecTV lodged a formal complaint with the U.S. Federal Communications Commission against Disney, alleging unfair and anticompetitive practices concerning their distribution agreement renewal.
InvestingPro Insights
As Walt Disney (NYSE:DIS) prepares to report its fourth fiscal quarter earnings, InvestingPro data indicates the company holds a substantial market cap of $169.8 billion, with a forward-looking P/E ratio of 35.76. Analysts on InvestingPro have highlighted that Disney is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential value for investors based on expected earnings. Additionally, Disney is recognized as a prominent player in the entertainment industry, which may contribute to its resilience in the face of sector challenges.
InvestingPro Tips reveal that Disney's net income is expected to grow this year, and the company is predicted to be profitable over the last twelve months. This aligns with the positive outlook from Goldman Sachs regarding Disney's Direct-to-Consumer segment and the anticipation of surpassing EPS expectations. Nevertheless, it's important to note that 14 analysts have revised their earnings downwards for the upcoming period, indicating that investors should keep an eye on the evolving market dynamics that could impact Disney's financial performance.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available, which provide more nuanced insights into Disney's financial health and market position. These tips can be accessed through the InvestingPro platform, offering a comprehensive tool for those looking to invest in the company.
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