Disney earnings: 2 things that could change this analyst's rating

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4 hours ago

Disney (DIS) is set to report earnings on Wednesday before markets open. TD Cowen managing director for media and entertainment Doug Creutz outlines what he'll be looking for in the results, including the two things that Disney could announce that could change his Hold rating on the stock.
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Zooming in on the upcoming earnings this week, Doug. What is your biggest question gonna be for the company sort of going in, uh, and awaiting those numbers?
Yeah, I think the question three months ago would have been, you know, how the park's doing. Uh, particularly with Comcast Epic Park opening. You know, there was some concern with that cut into Disney's attendance. I think Epic has done well, but it hasn't done so wildly well that you you would be really concerned that Disney was seeing, you know, a major impact, not that there won't be an impact, but I think everyone assumed there'd be some impact. Um, and I also, three months ago, people were more concerned about macro, and that that seems to have receded at least a bit. I think the the more important question is, you know, they had a summer with four big movies. One of them, Lilo and Stitch, the the remake, did very well. Um, they had an animated movie, Elio, which did incredibly poorly, and will almost certainly be a meaningful write-down. Uh, it's another original IP film that they have made that hasn't done well, uh, on the animated side. And it's not just them, it's the entire industry. Original IP animated films are struggling. They also had, I think maybe most concerningly, two well-reviewed Marvel films. Um, one, uh, uh, Fantastic Four, which had a good opening weekend, but really had a major falloff in the second weekend. Um, and and I think in general, there's gotta be some concern about the trajectory of the overall Marvel franchise, and and whether it's lost a lot of the interest that it used to have and was a key driver for them.
Yeah, I think we were a big Marvel household, and now we've got a little Marvel fatigue, I have to admit. Um, and and when you look at that that parks question, how do you think they will be doing given, to your point, the competition from the newly opened park in Florida?
Yeah, look, the parks business has been functioning very well. They had a little bit of a soft patch last summer, but it seems to have recovered. Uh, you know, again, I think Orlando will probably be a touch slower this quarter because of the Epic opening, but not so much that it's gonna have anybody concerned. You know, they've got, um, multiple cruise ships are gonna be coming to market over the next few years. That's an opportunity for them there to have additional growth. Uh, I I think the parks business is good, right? It's gonna continue to be good, sort of barring any major recession. I I think everybody knows that, right? It's sort of, I don't know as an investor if you get paid for the parks business being good just because that's kind of baked into the stock.
Uh, and speaking about being baked into the stock, you've got a hold rating on it, $123 price target. What has to change for you to get more bullish on Disney?
Well, I think one thing is we kind of need to know who's gonna replace Bob Iger.
Yeah, small, small thing, right, Doug?
Yeah, yeah, that remains a very open question. You know, will it be somebody internally? Will it be somebody from outside the company? Uh, we don't know. And he's, you know, he's supposed to be handing over the reins next year. Um, he's has he has been supposed to hand over the reins many times in the past, and, uh, you know, he's still CEO after after some time off. So, we'll see. I think that's a really big, important thing, and sort of whoever does replace him, what's their vision for Disney over the next 10 years? It won't necessarily be the same as Bob Iger's. Um, and then I think, you know, it's it's the media business, right? It's how how much can they grow Disney Plus profitability? I think that they can get it higher, but can they get it higher fast enough to offset the diminishing profits of linear? I think that's also, uh, another very open question that they have not been able to answer in any in any concrete way.