Needham analyst Laura Martin is doubling down on her bullish stance on Walt Disney Co. (DIS), reiterating a Buy rating with a $110 price target. This optimism stems from a combination of factors pointing towards a bright future for the entertainment giant.
Martin highlights Disney’s impressive progress in its direct-to-consumer (DTC) strategy. She expects the company to achieve DTC breakeven in fiscal 2024, with margins reaching “double-digit” levels as the platform matures. This positive outlook is further fueled by a projected influx of 5.5 million to 6 million new subscribers from Charter Communications, Inc (CHTR), starting in the second half of fiscal 2024.
Beyond streaming, Disney is making strategic moves to bolster its presence in other key areas. The company’s $1.5 billion investment in Epic Games aims to strengthen its position in the burgeoning video game market. Meanwhile, 70% of Disney’s $60 billion Parks CapEx will be allocated to “incremental capacity,” setting the stage for significant revenue growth in this segment.
The analyst also points to several other promising developments: a projected $8 billion of fiscal 2024 free cash flow, exclusive Taylor Swift concert rights for Disney+, a 50% dividend increase (to $0.90 per year) for a 1% yield, and over $3 billion of share repurchases in 2024.
Looking ahead, Martin sees Disney’s unique mix of digital and physical assets as a major competitive advantage. She believes that the company will capitalize on the rise of generative AI and its expansive streaming moat, making it an attractive takeover target for Big Tech players.
While Martin has lowered her fourth-quarter operating income and EPS estimates, she remains confident in the company’s long-term prospects. She attributes the lowered estimates to factors like ongoing linear subscriber declines and a carriage dispute with DirecTV, although these are partially offset by higher box office revenues.
Despite these near-term adjustments, Martin’s bullish stance on Disney is evident. She believes that the company’s strategic focus, robust content library, and expanding DTC presence position it for continued growth and success in the years to come.
