Goldman Sachs has issued a "buy" rating for Disney (DIS, Financial) with a target price of $139, following Disney's impressive first-quarter earnings for the fiscal year 2025, which surpassed Wall Street expectations.
Disney reported a 5% revenue increase to $24.7 billion, slightly above Goldman Sachs and market forecasts of $24.3 billion and $24.6 billion, respectively. Adjusted earnings per share (EPS) rose by 44% to $1.76, outperforming Goldman Sachs and market predictions of $1.57 and $1.45. Operating profit for business segments reached $5.1 billion, exceeding expectations of $4.7 billion and $4.5 billion, driven by better-than-expected earnings from the entertainment (DTC), sports, and experiences divisions.
Looking ahead, Disney anticipates a 6%-9% increase in adjusted EPS for fiscal year 2025, with an estimated $875 million rise in operating profit for its streaming entertainment segment. Goldman Sachs considers Disney's guidance to be conservative, highlighting Disney's consistent EPS growth driven by factors such as wholesale agreements, bundling, and password-sharing restrictions to enhance DTC profitability. Additionally, cost optimization and organizational restructuring are expected to improve film studio performance.
Goldman Sachs also notes effective management of sports rights costs through ESPN's DTC flagship platform and other strategic actions, addressing challenges from cable TV subscriber losses. The theme park business is projected to grow robustly, benefiting from industry tailwinds and a $60 billion investment over the next decade.
Overall, Wall Street analysts have given Disney a "strong buy" rating, with an average price target of $126.81, representing a 15% increase from the current stock price.
