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Disney (SAY) stocks rose more than 2% on Monday following another rise on Wall Street.
Barclays analyst Kannan Venkateshwar upgraded the stock from overweight to equal weight and increased his price target on the shares to $135 from $95 previously. The move implies an upside of around 15% based on current trading levels of around $120 per share.
Venkateshwar pointed to better-than-expected free cash flow and earnings guidance, coupled with “tactical tailwinds” such as Hollywood strikes, The consolidation of Hulu, And cost reductionshelped to strengthen investor confidence.
At the same time, “media investors’ propensity to be long Disney has allowed the stock to significantly outperform the broader markets so far this year, at a faster pace than expected.”
The stock is up sharply since the start of the year, up more than 30% compared to the S&P 500’s 10% rise over the same period.
This is a significant turnaround for the company after its stock price fell. multi-year lows Last year.
The media giant is grappling with challenges including declines in its linear TV business, slower growth in its parks business and losses in its streaming business. A heated proxy battle with activist investor Nelson Peltz has also clouded the company’s prospects.
But Venkateshwar argued that Disney’s next phase “could be more impactful because a number of turnaround elements are still underway and could manifest themselves in greater numbers starting next year.”
In his bull case, the analyst said faster-than-expected profitability could be a boon for the stock price.
“We expect Disney streaming to potentially break even a quarter or two earlier than the company’s guidance for the fourth quarter of 2024,” he explained. “This is partly due to tailwinds from cost reductions in recent quarters and recent price increases.”
Venkateshwar said he believed Disney would likely achieve streaming margins “better than Netflix,” estimating potential margins between 25 and 30 percent, “which is not much different from current linear margins.”
Other “positive narrative surprises” could include those from ESPN. streaming partners not yet announced for its over-the-top service, which is expected to debut in fall 2025, in addition to a refocused attention on long-term succession plans after the proxy battle.