The company said it will “nearly double” investments made for the segment over the next 10 years with a total of $60 billion.
An analyst broke down what this and other catalysts could mean for the future of Disney and its share price.
Bank of America analyst Jessica Reif Ehrlich had a Buy rating on Disney and lowered the price target from $135 to $110.
Four key items could drive the Disney business going forward with an attempt by CEO Bob Iger to use his second term to position the company in a changing landscape, Ehrlich said.
The four key priorities cited by the analyst are direct-to-consumer, managing the transition in linear, revitalizing the creative engine of the Disney brand and growing the theme parks.
“We expect progress on these priorities could take several quarters, if not years, to materialize,” Ehrlich said. “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 DIS.”
The analyst said the recovery of Disney’s theme parks after the COVID-19 pandemic has been “astounding” with revenue and operating income in recent quarters ahead of pre-COVID-19 pandemic levels.
“However, there appears to be ample runway to continue to invest and grow the business. There is still a $700 million addressable market.”
Ehrlich said for every park guest, there are still 10 consumers who like Disney and don’t visit the parks.
“As a result, DIS will lean into this opportunity and invest $60 billion into theme parks and experiences over the next decade.”
The analyst said the investment could help to drive “sustained longer-term growth.”
Outside of the theme parks and experiences business, a transition of the ESPN brand to direct-to-consumer from linear is a matter of when not if, according to the analyst.
“We believe DIS intends to employ a hybrid approach which balances the desire to grow subscribers while also protecting the existing ecosystem. Given ESPN+ has 25 million subscribers, we believe DIS has proven it has the ability to deliver a sports streaming product at scale.”
The analyst said ESPN has a strong brand and positioning in the sports sector, which could help future efforts.
Disney shares trade are up 1.20% at $82.94 on Wednesday versus a 52-week trading range of $79.75 to $118.18. Disney’s shares are down 7% year-to-date in 2023 and down 23% over the past year.
Produced in association with Benzinga
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