Analyst Says Walt Disney (DIS) Stock Could Double If Wall Street Rethinks Its Valuation

TLDR

• Needham reaffirms a Buy rating on DIS, setting a $125 price target that suggests approximately 32.7% upside.
• Disney’s stock is valued at 13.7x forward earnings, placing it nearer to cruise operators than media rivals such as Netflix at 28.5x.
• Analyst Laura Martin contends that persuading Wall Street to view DIS as a media firm could potentially double its valuation multiple.
• The theme park background of new CEO Josh D’Amaro is fueling worries about his capacity to steer the media division.
• Disney exceeded Q2 EPS forecasts ($1.63 vs. $1.57 expected) as revenue grew 5.2% year-over-year to $25.98B.

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(SeaPRwire) –   Walt Disney’s stock is valued similarly to cruise line companies—an issue one analyst sees as a significant challenge and an even greater opportunity.

The Walt Disney Company, DIS

Needham analyst Laura Martin restated a Buy rating on Disney on Tuesday, maintaining a $125 price objective. She highlighted that Disney presently trades at 13.7 times projected earnings—a figure closer to Carnival’s 10.5x and Royal Caribbean’s 14.4x than to Netflix’s 28.5x.

Martin’s analysis posits that this disparity is the central narrative. Disney is, at its core, a media company. However, Wall Street is not valuing it as such.

“When DIS was considered a Media company, it traded >20x earnings,” Martin wrote. “Closing this multiple gap is a key upside value driver.”

According to Martin, the route to narrowing that gap involves streaming. She states Disney must focus on improving streaming profitability, introduce bundled offerings to lower subscriber turnover, and produce more theatrical successes that boost subscriber growth.

Disney does operate a cruise line and is deliberately expanding that segment. The worry, however, is that the market has begun to price the entire enterprise as if it were primarily comprised of ships and theme parks.

New CEO Under the Microscope

This concern has been intensified by the change in leadership. Josh D’Amaro, formerly head of Disney’s experiences unit—encompassing theme parks, resorts, and cruise lines—was chosen to succeed Bob Iger.

Some investors feel apprehensive. D’Amaro’s expertise lies in the tangible assets of Disney’s operations, not in media and streaming. With traditional TV audiences declining and the streaming sector becoming fiercer, doubts are increasing regarding his aptitude for leading that part of the business.

Disney also revealed difficulties in certain technology partnerships, including challenges related to its collaborations with OpenAI and Epic Games, contributing to the surrounding news flow.

On a brighter note, Disney recently inaugurated Disney Adventure World at Disneyland Paris—an expansion costing roughly €2 billion centered around a World of Frozen zone. The new park’s potential for drawing visitors and merchandise sales received a favorable response from the market.

What the Numbers Say

Disney’s latest quarterly performance was robust. The firm announced earnings per share of $1.63, surpassing the $1.57 consensus estimate. Revenue reached $25.98 billion, a 5.2% increase from the prior year and above the projected $25.54 billion.

Analysts anticipate full-year EPS of approximately $5.47. The consensus among 24 analysts is a Moderate Buy rating, with an average price target of $134.

Goldman Sachs assigns a Buy rating with a $151 target. Jefferies gives it a Buy rating with a $132 target. Citigroup has a Buy rating and a $140 target. Wells Fargo reduced its target to $148, though that remains substantially above the current trading price.

The stock’s 52-week trading band is between $80.10 and $124.69. Its 200-day moving average stands at $108.69.

DIS shares rose 0.3% on Tuesday, closing at $94.59.