It’s been a good idea to be long Disney (DIS) these days. Shares of the media giant have soared over 20% the past year, hitting fresh highs. But the next big test comes this afternoon when Disney reports its fiscal second-quarter results.
Wall Street expects revenue to decrease about 1% to $14.4 billion, with EPS declining to $1.59, from $1.84 last year. The company implemented major changes over the past year, including announcing a video streaming service and this quarter closing on the acquisition of Twenty-First Century Fox.
Ahead of the print, Barclays analyst Kannan Venkateshwar is cautiously keeping his rating on Disney stock at Overweight with $150 price target, which implies nearly 11% upside from current levels. (To watch Venkateshwar’s track record, click here)
Venkateshwar notes that Disney’s stock has performed well since its Investor Day, but believes “there is meaningful uncertainty around earnings expectations.” Even as the company provided “financial information at the investor day and more granular information in its 8K,” the analyst still lacks “clarity on a number of details for estimates to converge around a tight range.”
Disney had a nice past few weeks, but some argue that this is unsustainable. For example, its latest Avengers movie is breaking worldwide box office records, earnings more than $2 billion, but of course this cannot be counted on each year. Furthermore, Disney+ was well received, but the company still must show it can execute and gain traction. Nevertheless, these two pieces of news has helped Disney stock.
But while it’s hard to tell exactly what earnings will say, Disney’s domestic parks is expected to continue showing growth. With attendance holding and spending per person increasing, Disney is expected to report higher revenue from domestic parks. This is expected to continue, as the new Star Wars attraction will come to both Florida and California sooner than originally expected.
The Fox acquisition will also be notable, as Venkateshwar believes “there is ~$1Bn+ EBITDA in Fox’s international business, which is likely to move to the DTCI segment part of the reporting structure,” and help contribute to the company’s bottom-line. On content, the analyst sees Disney’s spending at about $4 billion less than Netflix for FY20, but doesn’t expect the company to break even until 2024.
All in all, analysts are optimistic over Disney’s growth, as the company is showing promise in competing with entertainment upstarts. TipRanks analysis of 18 analyst ratings shows a consensus Strong Buy rating, with 16 analysts Buying and two recommending Hold. The average price target among these analysts stand at $150.40, suggesting the stock can rise 13% above current share price. (See DIS’s price targets and analyst ratings on TipRanks)