Wall Street Highlights – Equity

For fiscal first quarter 2025 (F1Q25), GS expect Disney to surpass consensus earnings estimates, forecasting adjusted diluted EPS of $1.57, compared to the Visible Alpha consensus of $1.45. This anticipated beat is supported by projected EBIT of $4.69 billion, exceeding the consensus of $4.49 billion, and revenue of $24.26 billion, which is broadly in line with consensus estimates of $24.63 billion. By segment, GS forecast Experiences operating income (OI) of $2.89 billion, Entertainment OI of $1.66 billion, and Sports OI of $151 million, with the latter significantly outperforming the $17 million consensus.

In the Parks and Experiences segment, GS expect 4% year-over-year revenue growth in F1Q25, driven by price increases, new offerings such as the Disney Treasure cruise ship, and cross-selling initiatives like the Lightning Lane Premiere Pass. However, domestic attendance is forecast to decline by 3% year-over-year due to demand normalization and disruptions caused by Hurricane Milton. Despite these headwinds, the segment is expected to deliver revenue of $9.50 billion and OI of $2.89 billion. GS forecast 6% OI growth for fiscal 2025, supported by factors such as Disneyland's 70th anniversary, further price increases, and improved consumer sentiment.

In the Entertainment segment, GS highlight improved box office performance as a key driver of growth. GS have raised Content Sales and Licensing (CSL) revenue estimate to $2.04 billion, reflecting better-than-expected global box office results. This improvement flows through to an updated CSL Earnings Before Interest and Taxes (EBIT) estimate of $400 million, compared to $313 million in consensus estimates. For the Direct-to-Consumer (DTC) sub-segment, Disney+ is expected to report flat core net additions in F1Q25, outperforming consensus expectations of a 1.0 million subscriber decline. Disney+ core Average Revenue Per User (ARPU) is projected to grow 13% year-over-year, supported by recent price increases and the expiration of promotional offers. GS forecast fiscal 2025 DTC EBIT of $1.3 billion, ahead of management’s guidance of approximately $1.0 billion, and fiscal 2026 EBIT of $2.3 billion, reflecting an 8% margin.

The Sports segment is also positioned for robust growth, with GS forecasting fiscal 2026 EBIT growth of 6%, compared to consensus expectations of 1%. This growth is underpinned by Entertainment and Sports Programming Network (ESPN)'s affiliate fee per subscriber increases, driven by the inflationary impact of the NBA rights agreement, and the anticipated launch of ESPN Flagship in fall 2025. The streaming service is expected to be priced at $30–$35 per month, with promotional offers likely to drive trial subscriptions. For F1Q25, Sports revenue is projected at $4.41 billion, with OI of $151 million, significantly outperforming consensus estimates of $17 million.

GS view Disney’s valuation as attractive, with the stock trading at 20 times fiscal 2025 estimated price to earnings ratio (P/E), below the S&P 500’s 22 times calendar 2025 P/E despite Disney's faster growth. GS maintain a Buy rating with a 12-month price target of $139 and forecast a 15% EPS compound annual growth rate (CAGR) from fiscal 2025 to 2027, driven by a mix of revenue growth, operational efficiency, and strategic investments.

Stock: DIS.US

Stock Rating: Buy

12m Price Target: USD139.00 (Previous Price Target: USD137.00)