BofA Securities analysts have reduced their target price on The Walt Disney Company (NYSE:DIS) stock to $110 per share from $135 previously, while reiterating their ‘Buy’ rating, reflecting the transition underway for Disney and the media industry in general.
In an update to clients, they noted the company’s reduced target price is in line with Disney’s historical premium to the S&P 500.
"The recovery in Disney theme parks post-COVID has been astounding as both revenue and operating income are well ahead of pre-pandemic levels, however the recent bounce back spotlights what had already been strong financial performance in theme parks over the past decade," the analysts wrote.
They called Disney’s recent decision to invest $60 billion into Theme Parks and Experiences over the next decade as being "prudent to drive sustained longer-term growth," given the return profile of these businesses.
Analysts at BofA also pointed to what they called key drivers for Disney’s business going forward, including its efforts to improve profitability, revitalizing the creative engine that is at the heart of the Disney brand and "turbo charging" growth in Theme parks.
"We expect progress on these priorities could take several quarters, if not years, to materialize but given Bob Iger's track record and stature in the media industry, we continue to believe his steady leadership bodes well for the future performance of its stock," they added.
Shares of Disney edged 0.8% higher to $82.57 in late-morning trading on Wednesday but have fallen 7% year to date.
Contact Sean at sean@proactiveinvestors.com