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Disney Shares Rise Following Upgrade

Disney (DIS) shares rose more than 2% on Monday following a fresh upgrade on Wall Street.

Barclays analyst Kannan Venkateshwar upgraded the stock to Overweight from Equal Weight and boosted his price target on
shares to $135 from the prior $95. The move implies roughly 15% upside based on current trading levels of about $120
a share.

Venkateshwar argued better-than-expected free cash flow and earnings guidance, coupled with “tactical tailwinds” such
as the Hollywood strikes, Hulu’s consolidation, and cost cuts, have helped buoy investor confidence.

Meanwhile, “the propensity among media investors to be long Disney, has resulted in the stock outperforming broader
markets meaningfully thus far this year, at a pace faster than we anticipated.”

The stock has been on a tear since the start of the year, up more than 30% compared to the S&P 500’s 10% rise over that
same time period.

It’s a significant turnaround for the company after its stock price hit multiyear lows last year.

The media giant has been grappling with challenges that include a declining linear TV business, slower growth in its
parks business, and losses in its streaming business. A heated proxy battle with activist investor Nelson Peltz has
also clouded the company’s outlook.

But Venkateshwar argued Disney’s next phase “may be more impactful as a number of turnaround elements still remain work
in progress and may manifest more in numbers starting next year.”

In his bull case, the analyst said sooner-than-expected streaming profitability could serve as a boon to the stock

“We expect Disney streaming to break even potentially a quarter or two earlier than company guidance of Q4 2024,”
he explained. “This is in part driven by the tailwinds from cost cuts over the last few quarters and recent price

Venkateshwar said he believes Disney will likely achieve streaming margins “that are better than Netflix,” estimating
potential margins in the 25% to 30% range, “which is not too different from where linear margins today are.”

Other “upside narrative surprises” could include ESPN’s yet-to-be-announced streaming partners for its over-the-top
service, set to debut sometime in fall 2025, in addition to a refocused attention on long-term succession plans
post-proxy battle.

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