On Friday, JPMorgan upheld its Overweight rating and $125.00 price target for Walt Disney shares (NYSE:DIS). The firm adjusted its earnings estimates for Disney prior to the company's fourth-quarter earnings report. The revision reflects a slight decrease in segment operating income by 1.8% to $3.72 billion, primarily due to expected lower revenues in Linear Networks and Sports, partially balanced by improved results in Content Sales & Licensing (CS&L).
The firm's earnings per share (EPS) estimate for Disney was also revised, with a minor reduction of $0.03, setting the new EPS forecast at $1.09. This change brings the full-year EPS estimate to $4.93, marking a 30% year-over-year increase and aligning with the company's own guidance. The dip in Linear Networks and Sports income is attributed to a 13-day service interruption with DirecTV, which is thought to have an approximately $80 million effect, mostly affecting affiliate revenue.
In the CS&L segment, the analyst's higher projections are supported by the strong performance of recent releases such as "Deadpool & Wolverine" and "Alien: Romulus," the latter surpassing a previous installment in the franchise by over $100 million. The Experiences segment saw a minor adjustment in operating income (OI) growth to -5.9%, with a more detailed -8.5% at Parks and a slight increase of 0.4% at Consumer Products. This was to account for a two-day closure of Shanghai Disneyland caused by a typhoon.
For Disney's Direct-to-Consumer (DTC) segment, JPMorgan forecasts net additions of 3 million subscribers for Disney+ and 0.9 million for Hulu, while maintaining OI projections at $151 million. Looking at the full year, the firm now anticipates a total segment operating income of $15.7 billion, indicating a 22% increase, and free cash flow (FCF) of $8 billion.
In other recent news, Walt Disney has been the focus of several key developments. Goldman Sachs reaffirmed its Buy rating on Disney, anticipating the company will surpass earnings per share expectations for Q4 2024, largely due to a strong performance in its Direct-to-Consumer segment.
However, the company faces challenges in its Experiences segment and from affiliate fee disputes. Disney is also set to phase out Slack, the workplace collaboration platform, following a significant data breach. The company successfully negotiated a new agreement with DirecTV, restoring access to popular sports and entertainment programming for over 11 million subscribers.
Disney led the Emmy race with a record number of nominations, attributed to the leadership of Dana Walden, Disney's TV chief. Despite these successes, Wells Fargo removed Disney from its Signature Picks List, citing potential impact on earnings due to a possible prolonged consumer recession.
InvestingPro Insights
Recent InvestingPro data adds depth to JPMorgan's analysis of Walt Disney (NYSE:DIS). The company's market cap stands at $172.88 billion, reflecting its significant presence in the entertainment industry. Disney's revenue for the last twelve months reached $90.03 billion, with a modest growth of 2.53%. This aligns with JPMorgan's observations on the company's performance across various segments.
InvestingPro Tips highlight that Disney is expected to see net income growth this year, supporting JPMorgan's projection of a 30% year-over-year increase in EPS. Additionally, the company's P/E ratio of 36.57 suggests it's trading at a high earnings multiple, which investors should consider alongside JPMorgan's Overweight rating.
For a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into Disney's financial health and market position. These tips could be particularly useful for investors looking to make informed decisions based on JPMorgan's updated estimates and the company's upcoming earnings report.
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