Disney initiated at Buy as analyst sees parks, streaming fueling next growth phase

Investing.com -- Benchmark initiated coverage of Walt Disney with a Buy rating and a $115 price target, arguing the entertainment giant is evolving beyond its legacy media roots into a diversified consumer engagement platform powered by its theme parks, streaming services and sports assets.

The brokerage said Disney's investment case is increasingly anchored by the strength of its Experiences business, improving profitability in streaming and the long-term opportunity to transform ESPN into a direct-to-consumer sports platform, offsetting continued structural pressure on linear television.

The initiation reflects growing optimism that Disney's earnings are becoming less reliant on its traditional television business, with analysts increasingly focused on the company's higher-margin Experiences segment, improving streaming economics and the long-term monetization potential of ESPN's direct-to-consumer strategy.

Benchmark said Disney's Experiences segment has become the company's earnings foundation, contributing roughly 57% of segment operating income despite accounting for less than 40% of revenue. It expects cruise expansion from eight ships to 13 by 2031, alongside new attractions and international growth, to provide a multi-year earnings tailwind.

The firm also said Disney's direct-to-consumer business has shifted from prioritizing subscriber growth to improving monetization through higher engagement, advertising, pricing and lower churn. It noted the streaming business has swung from nearly a $4 billion operating loss three years ago to about $1.3 billion in operating income in fiscal 2025.

Benchmark identified ESPN as both Disney's biggest opportunity and its largest execution risk. It said the launch of ESPN Unlimited, deeper NFL integration and a broader streaming bundle could transform ESPN into a leading direct-to-consumer sports platform, though rising sports rights costs and declining traditional affiliate revenue remain key challenges.

The brokerage expects catalysts over the next several years to include continued streaming margin expansion, cruise fleet growth, new park attractions, stronger advertising revenue, integration of Disney+, Hulu and ESPN, and an improved theatrical release slate, supporting sustained earnings growth and capital returns.

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