Disney (DIS) is cruising for a higher stock price this summer, according to Jefferies analyst James Heaney.
Heaney lifted his rating on Disney to Buy from Hold on Monday. His new price target of $144 assumes 18% upside ahead from the entertainment giant’s current level of $124.84 per share.
Yahoo Finance data shows Heaney is now one of the most bullish on the Street with respect to Disney.
“We upgrade Disney to Buy for four primary reasons: 1) Now see limited risk of a second half parks slowdown from Epic Universe/Macro [economy]; 2) More positive on FY26 cruise [business] upside, Jefferies estimates $1 billion plus revenue uplift; 3) Continued direct-to-consumer margin expansion (0% FY24 to 13% plus by FY28 estimate); 4) View next six months content and sports slate favorably, including ESPN direct-to-consumer launch, Zootopia 2 and Avatar 3,” Heaney wrote.
Disney stock rose 2% in premarket trading on Monday. The stock is up 10% year to date, compared with a 4% advance for the Dow Jones Industrial Average (^DJI).
“Disney has failed to grow operating income in FY16-FY24, but we believe this dynamic is set to change,” Heaney added.
His more bullish stance on Disney comes despite several headwinds facing the media giant.
First, the media industry itself continues to face upheaval.
Warner Bros. Discovery (WBD) said this month it will split up amid a shift to streaming that has financially hammered its legacy TV assets. The company joins rival Comcast (CMCSA) in separating TV operations from streaming assets. Meanwhile, Paramount (PARA) is still trying to close its merger deal with Skydance.
Disney has repeatedly said it has no desire to spin off its TV networks, such as ABC, despite the industry challenges that have weighed on sales and profits.
“I think it’s harder [to split up] than most people realize. And the interesting thing is, for the past five to 10 years, we have been putting them together — linear TV content creates the streaming content. Now all of that has changed,” former BET CEO and current Warner Bros. Discovery board member Debra Lee told Yahoo Finance earlier in June.
Second, Disney is still smack in the middle of appointing a CEO to succeed Bob Iger.
Four internal candidates are reportedly being considered for the coveted position, which Iger held from 2005 to 2020 before returning in November 2022. Those four are entertainment division co-chiefs Dana Walden and Alan Bergman, parks division head Josh D’Amaro, and ESPN chairman Jimmy Pitaro.
Walden and D’Amaro are rumored to be top contenders.
The search process must be executed flawlessly, following a high-profile bungling last time, when former CEO Bob Chapek was fired in favor of bringing back Iger.
Chapek’s brusque management style famously clashed with the many creatives who keep the magic inside of Disney’s content and theme parks.
A CEO decision is widely expected by year-end.
“I think the biggest skillset you have to have is a gift of a real strategic business sense because there’s a bunch of assets at Disney that are globally deployed,” Candle Media CEO and former top Disney executive Kevin Mayer said on Yahoo Finance’s Opening Bid podcast (watch above). “It’s multifaceted, from theme parks to consumer products to movies to film to TV to Disney+ to Hulu to ESPN. You got to manage a lot, and then you have to also decide, what assets do we keep? What assets do we add?”
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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