JPMorgan Raises Price Target on Walt Disney (DIS) Into 'De-risked' FQ4 Earnings, Current Levels Seen as an Attractive Entry Point for LT Investors

JPMorgan analyst Alexia Quadrani raised the price target to $230.00 per share from the prior $220.00 on the Overweight-rated Walt Disney (NYSE: DIS) stock.

A new price target reflects the updated model on key factors ahead of FQ4 earnings that Disney is due to report on November 10.

“On the DTC side, we are adjusting our split of Disney+ and Hotstar subscribers for FQ4, now expecting Hotstar subscribers to decline by -3m adds in the quarter (from flattish prior), offset by better growth at core Disney+ subs to +6m net adds (from +2.5m prior), and we maintain our FQ4 estimate of 119m. At the Parks, we expect a solid recovery in FQ4 despite a brief slowdown in attendance in the second half of August, which reversed after Labor Day. We anticipate that the easing of international travel bans in the U.S. for fully vaccinated visitors after November will help lift attendance. Finally, at Linear Networks, we expect a renewal of Disney’s recently expired contract with Comcast to be achieved; larger renewals have otherwise been completed,” the analyst explained in a client note.

On the valuation front, Quadrani “continues to view the stock’s current levels as an attractive entry point for the longer-term investor.” However, he acknowledges that some investors are requiring more clarity and visibility on the pace of subscriber growth. This factor is likely to be the key before there is a “meaningful move” in the Disney stock price.

“We are lowering the multiple for F23 as we expect the DTC business will be more mature by year-end F23, with the vast majority of market launches complete, and we expect to see a steady state in content drops on a weekly basis during the year. However, we continue to use a multiple that is a slight premium to that of Netflix, which currently trades at ~7.5x 2023 revenues, due to the higher growth trajectory of Disney’s DTC revenues at +30% y/y growth vs. Netflix’s revenue growth of ~15% y/y in 2023,” the analyst concluded.

As far as investors’ reaction to the upcoming FQ4 earnings report, the analyst doesn’t expect a big move following CEO Chapek’s recent comments.

The Disney stock price is trading at $177.94, up 1.4% on the day.

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