Disney Initiated with 'Buy' Rating at Benchmark on Parks and Streaming Strength

Benchmark initiated coverage on The Walt Disney Company (NYSE: DIS) with a Buy rating and a $115 price target, asserting that the company is successfully evolving from its legacy media foundation into a diversified consumer platform.

Analyst Sees New Growth Pillars

In its initiation note, Benchmark argued that Disney's investment case is increasingly driven by the strength of its Experiences business, which includes theme parks and cruises, alongside improving profitability in its streaming services. The firm sees these segments, combined with the long-term potential of a direct-to-consumer ESPN, as powerful enough to offset the structural pressures on its traditional linear television business.

The brokerage views Disney as a consumer engagement platform, with earnings becoming less reliant on its traditional TV networks. The focus is shifting toward the company's higher-margin segments and the monetization of its direct-to-consumer strategy.

Parks and Streaming Drive Profitability

According to Benchmark, Disney's Experiences segment has become the company's "earnings foundation." The division is responsible for approximately 57% of segment operating income while generating less than 40% of total revenue. The firm anticipates a multi-year earnings tailwind from this segment, supported by:

Ad

• An expansion of its cruise line fleet from eight ships to 13 by 2031.
• The introduction of new park attractions.
• Continued international growth.

At the same time, Benchmark noted a strategic shift in Disney's direct-to-consumer business from prioritizing subscriber growth to enhancing monetization. This focus on engagement, advertising, and pricing has led to a significant financial turnaround, with the streaming business projected to swing from a nearly $4 billion operating loss three years ago to an estimated $1.3 billion in operating income in fiscal 2025.

ESPN's Future is Key Opportunity and Risk

Benchmark identified the sports network ESPN as both Disney's "biggest opportunity and its largest execution risk." The successful launch of a comprehensive direct-to-consumer sports platform could be transformative. However, the firm also pointed to significant challenges, including rising sports rights costs and the continued decline of traditional cable affiliate revenue.

Looking ahead, the brokerage expects sustained earnings growth to be supported by several catalysts, including continued streaming margin expansion, a stronger theatrical film slate, and the further integration of Disney+, Hulu, and ESPN.