On Wednesday, Piper Sandler initiated coverage on Walt Disney Company (NYSE:NYSE:DIS) shares with a Neutral rating and set a price target of $95.00. The firm's analysis pointed to a projected limited upside for Disney's financial estimates in the coming quarters, primarily due to expected continued moderation in the company's experiences segment.
The coverage report highlighted concerns about the consumer-related slowdown in Disney's parks business, which is anticipated to continue affecting the company's performance for several more quarters. With the experiences segment accounting for approximately 40% of the segment's operating income, Piper Sandler does not anticipate significant material upside in the near term.
Despite these short-term challenges, the firm acknowledged the strength of what it referred to as the "Disney flywheel" and the company's unparalleled portfolio of industry assets, especially following recent successes in film production. Furthermore, the report noted that Disney's direct-to-consumer (DTC) business has achieved profitability through effective cost management strategies.
However, Piper Sandler expressed the need for further details regarding the timeline for Disney's next phase of margin growth, specifically aiming for double-digit targets. The firm indicated a preference for evidence of stability in Disney's experiences business before adopting a more positive stance on the company's stock.
In other recent news, Walt Disney Company has been the focus of significant developments. Goldman Sachs reaffirmed its Buy rating on Disney, projecting a $150 million to $200 million hit to the Parks and Experiences segment's EBIT for the first fiscal quarter of 2025 due to Hurricane Milton. However, the firm still anticipates Disney to report fourth fiscal quarter 2024 earnings per share of $1.16.
In the Philippines, a newly introduced 12% value-added tax on digital services offered by international tech firms, including Disney, is expected to generate around $1.9 billion from 2025 to 2029. Charter Communications (NASDAQ:CHTR) plans to include NBCUniversal's Peacock streaming service in its Spectrum TV Select package, complementing its existing offerings such as Disney+.
Meanwhile, Disney's stock rating was downgraded from Outperform to Market Perform by Raymond James due to concerns about the near-term prospects of Disney's Parks segment. Despite this, BofA Securities maintained a Buy rating on Disney, emphasizing its robust portfolio and potential for growth.
Lastly, JPMorgan revised Disney's earnings per share estimate to $1.09, primarily due to expected lower revenues in Linear Networks and Sports. However, Goldman Sachs continues to express confidence in Disney's financial performance, predicting the company will surpass earnings per share expectations for Q4 2024, largely due to strong performance in its Direct-to-Consumer segment.
InvestingPro Insights
Adding to Piper Sandler's analysis, recent InvestingPro data provides additional context to Disney's financial landscape. The company's market capitalization stands at $171.1 billion, reflecting its significant presence in the entertainment industry. Disney's P/E ratio of 35.9 suggests a premium valuation, which aligns with Piper Sandler's cautious outlook on near-term upside potential.
InvestingPro Tips highlight that Disney is expected to see net income growth this year, and analysts predict the company will remain profitable. This positive outlook on profitability supports the firm's acknowledgment of Disney's strong asset portfolio and recent successes in film production.
However, the InvestingPro data also reveals that Disney's revenue growth in the last twelve months was modest at 2.53%, which may contribute to the concerns about the consumer-related slowdown mentioned in Piper Sandler's report. This slower growth could be particularly impactful on the experiences segment, which the analysts identified as a key area of focus.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights with 9 more tips available for Disney, providing a deeper understanding of the company's financial health and market position.
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