By Sam Boughedda
Morgan Stanley analysts reiterated an Overweight rating on Walt Disney (NYSE:DIS) shares, cutting the firm's price target on the stock to $115 from $125 per share.
They told investors in a research note that the returning CEO arrives with Disney facing "known but real secular and cyclical headwinds," however, their analysis suggests cost opportunities at the media business and momentum at parks should "allow Disney to deliver on FY23 guidance and support ~20% expected adj. EPS CAGR forecast through F25E."
Even so, Morgan Stanley lowered estimates to reflect updated F23 guidance, and is now "forecasting HSD OI growth and FY23 and FY24 adjusted EPS of roughly $4.00 and $5.15, respectively," while "eliminating streaming operating losses should bring FY25 adjusted EPS of $6-7."
"[The] Return of Bob Iger as CEO offers the opportunity to reorganize Disney's Media businesses (DMED) to prioritize driving overall Disney consolidated earnings growth. We also see opportunities to rationalize DMED's expense base. Finally, de-prioritizing the F24 Disney Plus subscriber guidance could help refocus the company and the market on overall earnings power rather than sub targets," wrote the analysts.
"Parks & Experiences business is potentially exposed to a weakening consumer, but current forward bookings are strong. We see our reduced outlook for US Parks in FY23 with risk fairly balanced to the upside (stronger per caps than our low-single digit YoY assumption given recent price increases) and downside (consumer recession)," they added.
Long term, Morgan Stanley continues to believe Disney can deliver "significant earnings growth," driven by its Parks & Experiences business and, starting in F24, its Media & Entertainment businesses.