Walt Disney Stock Analysis: Citi Sees Attractive Risk-Reward Opportunity

Citi analysts have resumed coverage of Walt Disney Company (NYSE:DIS) with a "Buy" rating, citing an attractive risk-reward opportunity at current levels. The firm believes that Disney's long-term growth prospects, particularly in streaming and entertainment, position the company for solid earnings expansion.

Citi's Earnings Projections

Citi forecasts Disney's adjusted earnings per share (EPS) growth as follows:

• 8% in fiscal 2025

• 11% in 2026

• 13% in 2027

These projections align with Disney's own guidance of high single-digit EPS growth in FY25 and double-digit growth in subsequent years. However, Citi's estimates of $5.35 EPS for FY25 and $5.95 EPS for FY26 fall slightly below Street expectations by 2% and 4%, respectively.

Target Price and Growth Drivers

Citi has set a target price of $125, implying a 15% upside from Disney's current share price of $108.70 (as of January 21).

Key growth drivers for Disney include:

1. Direct-to-Consumer (DTC) Streaming Growth

   • Expected to achieve ~10% EBIT margins by 2027.

   • Projected ARPU growth of 2-4% annually.

   • Subscriber additions of:

     • 8 million in FY25

     • 7 million in FY26

     • 6 million in FY27

2. Hulu Live-Fubo Integration

   • Expected to close by fiscal Q3 2026.

   • Anticipated to yield $140 million in annual synergies.

3. Entertainment Segment Recovery

   • Citi forecasts a 20% rebound in the U.S. box office in FY25, boosting Disney's media revenue.

Risk Scenarios

Citi outlined both bullish and bearish scenarios for Disney's stock:

• Bearish Case:

  • Economic headwinds or intensified competition could drive the stock down to $96 per share.

• Bullish Case:

  • Stronger-than-expected ARPU growth and improved valuation could push the stock to $134 per share.

Disney's Future Outlook

Citi remains optimistic about Disney's ability to pivot to streaming profitability while continuing to invest in its parks and cruise segments to drive long-term growth. The firm emphasizes the potential upside Disney offers with its strategic investments and operational improvements.

Track Disney's Financial Performance

Investors looking to stay informed on Disney's financial performance can leverage the following resources:

• Balance Sheet Statements - Gain insights into Disney's financial position, assets, and liabilities.

• Company Rating - Evaluate Disney's overall financial health and market position.

Conclusion

With Disney's strategic focus on streaming growth, content monetization, and a potential rebound in the entertainment sector, Citi believes the company presents a compelling investment opportunity. While near-term challenges persist, the long-term outlook remains promising, supported by strong brand equity and strategic initiatives.