Analysts at UBS have lowered their price target on The Walt Disney Company (NYSE:DIS) stock to US$110 as they expect the company’s upcoming fourth quarter fiscal 2023 results to reflect continued pressure on the company’s Linear segment, which includes cable and broadcast channels such as ESPN, Disney Channel, Disney Junior and ABC.
They expect the company to return earnings per share (EPS) of $4.82 in fiscal 2024, down from their earlier expectation of EPS of $5.46 on continued headwinds in Linear and a higher minority interest drag from growth in international parks.
Based on their revised estimates, the analysts lowered their price target on Disney stock from US$122 to US$110.
Disney shares traded hands at about US$86 on Tuesday afternoon.
Ahead of Disney’s 4Q earnings due November 8 after the market close, the analysts forecast these will reflect continued topline pressure on Linear, in addition to cost-cutting and solid, albeit moderating growth for US parks.
“We expect total revenues to grow 5.2% year-over-year (prior 5.7%) while earnings before interest and taxes increase to $2.85 billion from $1.60 billion last year as DIS laps peak direct-to-consumer dilution,” they wrote in a note to clients.
For Disney’s parks, the analysts expect to see margin expansion despite tough comparisons (comps).
“We expect Disney Parks, Experiences and Products revenues of $8.3 billion, up 11% versus 13% in the fiscal third quarter as difficult comps from the Walt Disney World’s 50th anniversary are offset by continued momentum at the international parks,” they wrote.
“With uplift from cruises and international parks, we expect fiscal 2024 revenues and earnings before interest and taxes to grow 5% and 9% [respectively], though this remains subject to resilient macro/consumer spending.”
They also expect management to highlight Disney’s efforts to reach direct-to-consumer breakeven in fiscal 2024, specifically updates on ad tier uptake and password sharing, and plans for improved monetization of its global intellectual property and ESPN.
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