Disney will release a report this week. Why do analysts advise buying the stock?

The world's largest entertainment and media company Walt Disney publishes its quarterly report on August 6, and market expectations are rising. Ahead of its publication, Morgan Stanley raised its target price for the stock - it expects it to rise 20% from current levels. Analysts at UBS and Jefferies are also positive and advise buying the stock despite the fact that it has already risen 30% over the past year. The success of streaming, steady demand for theme parks and impending premieres may lead the company to a new stage of growth in the coming quarters.

Morgan Stanley on Aug. 4 improved its outlook on Disney shares, raising the target from $120 to $140 and reiterating an Overweight rating to a "buy" recommendation, wrote CNBC. Analyst Benjamin Swinburne believes that with a stable economy, Disney could restore earnings to pre-pandemic levels and reach new highs by 2027.

"After the pivot to digital platforms, the effects of the pandemic and the mass abandonment of cable TV, Disney came close to regaining its profit base. The success of streaming as a source of revenue and the growth in theme park attendance contributed to this," the analyst emphasized.

Disney shares were up 1.2% in the Aug. 4 premarket, though they closed the previous session on Aug. 1 down 2.1%. 

Current stock momentum remains strong, confirmed by Zack's analysts. Disney shares are up 30% year-to-date, which is above the media conglomerate sector average (up 27%). The main contributors to the revenue growth were theme parks, cruise program and Disney Vacation Club program, which allows booking vacations at the chain's resorts on discounted terms, according to TradingView. 

Of the seven analysts tracked by Visible Alpha, six recommend Disney stock as a buy and only one advises holding. The average target price on the stock is around $136, writes Investopedia. According to Visible Alpha's consensus forecast, Disney is likely to report revenue of $23.75 billion and adjusted earnings per share of $1.48, both higher than a year ago.

UBS analysts in July raised their target price on the stock from $120 to $138, citing "robust demand" at theme parks and improving streaming margins amid preparations for the launch of a standalone ESPN streaming service scheduled for later this year.

"We maintain a positive outlook for FY 2026, given sustained trends in parks, increased cruise fleet, strong content and margin growth in the direct-to-consumer segment. Full control of Hulu will also provide additional upside," UBS said in its review. The bank's analysts assigned a Buy rating to Disney shares.

Jefferies called the current quarter "pivotal" for shaping Disney's positive investment narrative for the next two years. Analysts reiterated a "buy" rating and $144 target price, citing a strong set of upcoming movie and streaming releases, as well as the launch of two new cruise ships before the end of the calendar year.

Last quarter, the company exceeded analysts' expectations, surprising with growth in subscribers to its Disney+ streaming service, as well as announcing plans for a new theme park in Abu Dhabi, UAE. Disney then raised its full-year adjusted earnings-per-share forecast to $5.75, up 16% from 2024, reminds Investopedia. 

The company now expects double-digit operating profit growth in the entertainment segment through fiscal 2025. The revenue forecast for the year is for 3.7% growth. However, rising content costs are squeezing Disney+ margins and increasing costs in the entertainment segment, Zack's analysts emphasize. 

This article was AI-translated and verified by a human editor