Jefferies Starts Disney with a Hold, Bullish on Streaming, Cautious on Parks From Investing.com

Investing.com – Jefferies creates Walt Disney Company (NYSE:) with a “Hold” rating and a $120 price target, citing profitability prospects in streaming but tempered by challenges in its parking division.

Jefferies expects margins on Disney’s direct-to-consumer business to improve from 1% to more than 10% by 2027.

Bundling initiatives, pricing adjustments, advertising growth and disciplined content costs are expected to drive this growth. Streaming, excluding Hulu Live, is projected to contribute about 70% of Disney’s operating profit growth through fiscal 2026.

Disney’s scaled advertising platform through Hulu, which will generate an estimated $3 billion in revenue in 2024, positions the company as a leader in connected television (CTV) advertising.

This advantage is expected to help Disney narrow the gap with Netflix (NASDAQ:) in average revenue per user (ARPU), thereby fueling long-term growth.

However, the parks and experiences segment, which accounts for 59% of Disney’s operating revenue, is grappling with slower attendance growth and increasing competition from Universal’s upcoming Epic Universe park in 2025.

Jefferies flagged the possible over-reliance on price increases to drive growth, which could stall amid weakening consumer sentiment.

Key downside risks to the Jefferies target include difficulty scaling streaming profitability and continued weakness in the Parks segment. Disney shares have gained around 30% so far this year.