Disney can see big earnings growth ahead that will power the stock higher, says Morgan Stanley

Morgan Stanley has raised its price target for Walt Disney (DIS) to $140 from $120, maintaining an overweight rating, citing potential for approximately 20% upside from Friday's close. The firm projects strong double-digit adjusted EPS growth for Disney in the coming years, driven by robust performance in its Experiences and Streaming segments, with streaming now emerging as a profit center and offsetting linear entertainment declines. This forecast, contingent on a healthy macroeconomic backdrop, suggests Disney is poised to rebuild its pre-pandemic earnings base and achieve new highs by FY27, ahead of its fiscal third-quarter report.

Analysis

Morgan Stanley has upgraded its price target for Walt Disney (DIS) to $140 from $120, maintaining an overweight rating and projecting approximately 20% upside from its recent closing price. The firm's positive outlook is contingent on a sustained healthy macroeconomic environment, which it believes will enable Disney to achieve healthy double-digit adjusted EPS growth in the coming years. This growth is primarily attributed to the strong performance of its Experiences division and a significant strategic pivot in its media business. According to the analysis, Disney's streaming (DTC) and content sales segments are now generating enough growth to more than offset the declines in its Linear Entertainment segment and a flat performance from ESPN. This transition has established streaming as an emerging profit center and has nearly completed the rebuilding of Disney's pre-pandemic earnings base, with the company poised to reach new earnings highs by fiscal year 2027. This analyst update, noting a 5% share price increase in 2025, precedes Disney's upcoming fiscal third-quarter earnings report.

Key Decisions for Investors

• Given the forecast for double-digit EPS growth and a 20% upside, investors with a bullish macroeconomic view may find the current valuation an attractive entry point.
• Investors should closely monitor the upcoming fiscal third-quarter report for confirmation of the streaming segment's profitability and continued strong growth in the Experiences division, as these are the core tenets of the bull thesis.
• The forecast's explicit dependence on a 'healthy macro backdrop' presents a key risk, so it is prudent to weigh potential economic headwinds against the company-specific growth drivers outlined in the analysis.