Media Stocks Look to Rebound

Media stocks have faced a challenging period recently, and Walt Disney Co. has become a prime example, with its shares plummeting by over 50% in the past two years.

However, according to one analyst, Disney’s latest earnings report suggests that the company may be on the verge of financial improvements. Positive earnings revisions could potentially drive Disney’s stock price, indicated the analyst.

Disney has faced various pressures, including advertising weakness, cord cutting, escalating sports rights costs, and an underperforming movie slate. But Nathanson believes that Disney’s efforts to cut expenses and production spend will help boost cash flow and margins by FY 2024 and beyond.

A significant step towards financial improvement in Disney’s non-parks business is their decision to reduce non-sports content spending to $15 billion from previous expectations of around $20 billion, according to Nathanson. He continues to maintain his buy rating and a target stock price of $115.

The focus on studio woes by Disney CEO Bob Iger shows his commitment to addressing the challenges head-on. But will these efforts be enough?

Wells Fargo Bullish on Disney’s Cost-Cutting and Streaming Strategy

Wells Fargo’s Steven Cahall predicts an upward shift in earnings estimates for Disney due to recent cost-cutting measures and new strategic initiatives. Over the last year, CEO Bob Iger has been diligently working on shaping Disney’s overall strategy. Cahall highlights Disney’s key focus areas, including improving streaming profitability, enhancing content quality, evolving ESPN, investing in parks, and generating free cash flow.

Cahall has increased his price target for Disney’s stock from $115 to $110 in his latest note. He believes that sustained progress towards higher streaming operating margins, as well as the further expansion of ESPN’s presence in the streaming industry, could tremendously benefit Disney’s stock performance. Consequently, Cahall rates Disney’s stock as overweight.

Rosenblatt Boosts Price Target Amidst Improved Performance

Barton Crockett from Rosenblatt acknowledges that Disney’s performance in the September quarter showed signs of improvement compared to recent trends, which relieves some pressure and restores confidence in the company’s future prospects. As a result, Crockett raises his price target for Disney’s stock from $103 to $114 in his latest report. He maintains his buy rating on the stock.

Evercore ISI: A Cautious Bullish Stance

While remaining bullish on Disney’s stock, Vijay Jayant from Evercore ISI expresses a degree of caution regarding the pace of earnings growth. Jayant acknowledges Disney’s strength in pivoting towards the streaming market in the long run. However, he points out the inherent uncertainty surrounding the company’s growth potential and legacy linear assets. Regardless of these concerns, Jayant reiterates his outperform rating on the stock and maintains a target price of $100.

In conclusion, analysts have varying views on Disney’s future prospects. Wells Fargo is optimistic about the company’s cost-cutting efforts and streaming strategy, while Rosenblatt acknowledges signs of improvement in performance. Evercore ISI expresses bullish sentiment but highlights the need for careful consideration due to various growth factors and legacy assets.