J.P. Morgan upgraded Walt Disney (NYSE:DIS) stock rating to an Overweight rating from Not Rated, setting a December 2024 price target of $140, up from the prior target of $120.
The move implies roughly 20% upside based on current trading levels of about $116 a share.
Disney shares have been on a tear so far in 2024, climbing over 28% compared to the S&P 500's 8.6% rise over the last three months.
Analysts at J.P. Morgan cited Disney's unique content, improving financials for its streaming services, and the robust operation of its parks as key factors behind the upgrade.
Disney's direct-to-consumer (DTC) segment is on track to turn a profit in the last quarter of fiscal 2024, thanks to a solid boost in new Disney+ subscribers. On top of that, analysts are forecasting a big leap in operating income, fueled by the success of its international parks.
Analysts also raised their adjusted earnings per share (EPS) forecast for Disney for the fiscal year ending September 2024 to $4.64 from $4.25 previously.
The report outlines Disney's strategic measures to ramp up its creative output and improve financial results across its business segments, including the direct-to-consumer, experiences, content sales and licensing, and sports divisions.
Disney shares have outperformed the market notably over the past six months, bouncing back from below $80 in October.
The valuation model suggests that the experiences segment alone justifies a big chunk of Disney's market price, with the DTC segment also contributing meaningfully to the company's valuation.
Finally, the bank acknowledges challenges in the legacy media landscape but believes Disney is well-positioned to navigate these through cost restructuring and strategic partnerships.
The firm sees execution on initiatives, increased financial visibility, and content upside as catalysts for further consensus revisions and multiple expansions.