Why UBS Is Now a Big Bull Ahead of Disney Earnings

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Walt Disney Co. (NYSE: DIS) is scheduled to release its most recent quarterly results later this week. However, ahead of this, UBS analyst Jon Hodlik gave his two cents on where the House of Mouse may be heading.

In terms of the consensus estimates, analysts are calling for $1.59 in earnings per share (EPS) and $14.39 billion in revenue. The same period of last year had $1.84 in EPS and $14.55 billion in revenue.

Ultimately, UBS said that it is increasing its preliminary expectations on the Disney+ OTT/DTC service. The firm now expects 65 million subscribers by 2024. While that is out five years, the implied numbers from the company were 60 million to 90 million subscribers and the prior estimate had been 50 million from the United States.

The number also indicates 52 million subscribers for Hulu and 8 million for ESPN+. All in, this indicated a combined 125 million global subscribers in fiscal year 2024, compared with a current global subscriber base of 155 million and a 2024 estimated 300 million-plus for Netflix.

According to the report:

Management’s guidance for DTC suggests larger near term losses than we had anticipated, but with the path to profitability sooner than expected. We now expect the DTCI segment to reach breakeven in FY24 versus a prior expectation of a $2 billion loss in Fiscal Year 2024 and breakeven in FY26.

UBS also noted that the faster subscriber ramp-up and the stronger operating leverage than previously forecast raises the firm’s outer-year EBITDA estimates by 20% to 30%, excluding the consolidation of Fox assets.

Accordingly, UBS reiterated a Buy rating and raised its price target to $165 from $128.

Shares of Disney were last seen at $134.80, in a 52-week range of $98.81 to $142.37. The consensus price target is $140.61.

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