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On Monday, CFRA, a prominent financial research firm, increased its price target for Walt Disney shares (NYSE: NYSE:) to $139 from the previous target of $120, while maintaining a Buy rating on the stock. The adjustment reflects CFRA’s confidence in Disney’s strategic plan to enhance growth and enterprise value ahead of the upcoming shareholder meeting on April 3, 2024.
The firm’s analyst cited Disney’s comprehensive approach to driving future growth as a key factor for the raised target. The new price target is based on a forward Total Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (TEV/EBITDA) multiple of 14.1 times CFRA’s 2024 EBITDA estimate of $1.46 billion.
This valuation multiple is significantly lower than Disney’s five-year historical average of 22.5 times but represents a premium compared to peers in the linear network space, which trade at high-single digit multiples.
Disney’s valuation is supported by its Experiences segment, including parks and cruise lines, which accounted for 37% of the fiscal year 2023 revenue ending in September and 59% of its operating income. Moreover, Disney’s leading Sports franchises through ESPN networks contribute 18% of revenue and 33% of operating income.
The analyst highlighted the entertainment division, which encompasses film, television networks, and direct-to-consumer units such as Disney+, ESPN+, and Hulu, as central to Disney’s turnaround narrative.
The report also commends Disney’s efforts in driving efficient content spending and its plan to cut expenses by $7.5 billion. New partnerships in gaming and sports gambling were noted as positive steps.
Moreover, Disney’s intention to purchase the remaining 33% minority interest in its operations from Comcast (NASDAQ: NASDAQ:) is expected to cost between $10.0 billion and $11.5 billion. Nevertheless, CFRA believes this acquisition will be beneficial for the Disney+ bundle offering.
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