On Tuesday, Loop Capital adjusted its price target for Walt Disney Co (NYSE: NYSE:DIS) shares, reducing it to $130 from the previous $139. Despite this change, the firm continues to recommend a Buy rating for the entertainment giant. The adjustment reflects a reassessment of the company's financial prospects, particularly in its film and parks divisions, as well as its streaming services.
Loop Capital's analysis suggests that the market is not fully appreciating the potential profit from Disney's film releases in the second half of the fiscal year, which could be around $350 million higher than expected. This view comes despite recent challenges faced by Disney's Parks division, which have been factored into the stock price following a 10% drop after the last earnings call. The firm also noted that the market has considered the results from Comcast (NASDAQ:CMCSA)'s park business.
The report further highlights that Comcast's streaming losses were smaller than anticipated, a trend that might continue into the current quarter as traditional studios prioritize profitability. However, Disney is expected to encounter specific challenges with its Hotstar cricket streaming rights during this period.
Loop Capital believes that Disney's stock presents an attractive risk/reward scenario at current levels. The firm anticipates that the stock's downside could be in the high $80 range, which would be approximately 16.5 times their estimated earnings per share for 2025. This valuation represents a 15% discount compared to the S&P 500 and is at the lower end of Disney's historical valuation range.
The revised price target of $130 is based on the expectation that Disney's content business will begin to realize a portion of its previously untapped earnings potential and that its direct-to-consumer (DTC) segment will achieve profitability.
InvestingPro Insights
As Loop Capital adjusts its outlook on Walt Disney Co (NYSE:DIS), it's essential to consider the current financial metrics that paint a picture of the company's performance. According to real-time data from InvestingPro, Disney's market capitalization stands at a robust $167.98 billion. However, investors should be aware of the company's high earnings multiple, with a P/E ratio of 99.7, signaling a premium valuation in the market. For those looking into the future, the adjusted P/E ratio for the last twelve months as of Q2 2024 is more moderate at 39.05.
InvestingPro Tips highlight that analysts are optimistic about Disney's profitability, with net income expected to grow this year and five analysts revising their earnings upwards for the upcoming period. This aligns with Loop Capital's view that the market may not be fully appreciating Disney's potential profit from its film releases. Additionally, Disney's status as a prominent player in the Entertainment industry remains uncontested.
For readers looking to delve deeper into Disney's financial health and prospects, InvestingPro offers additional tips, including the company's moderate level of debt and its ability to cover short-term obligations. To access these insights and more, visit InvestingPro and use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. Note that there are 8 additional InvestingPro Tips available that could further inform your investment decisions regarding Disney.
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