Disney Gains Buy Rating on Parks, Streaming Strength

Key Moments

Benchmark began coverage of Walt Disney with a Buy rating and a $115 price target, highlighting a shift toward a diversified consumer engagement model.
Disney’s Experiences segment has been generating about 57% of segment operating income while contributing less than 40% of revenue.
The streaming division has moved from nearly a $4 billion operating loss three years ago to an expected approximately $1.3 billion in operating income in fiscal 2025.

Benchmark Launches Coverage With Bullish View

Investing.com – Benchmark initiated coverage of Walt Disney with a Buy recommendation and a $115 price objective, stating that the company is transitioning from a legacy media enterprise into a broad-based consumer engagement platform. The firm pointed to the combined strength of Disney’s theme parks and Experiences business, its streaming operations, and its sports portfolio as the primary engines for the group’s next phase of growth.

According to the brokerage, the investment thesis for Disney is increasingly grounded in three pillars: the robust performance of its Experiences unit, improving profitability in its direct-to-consumer streaming business, and the long-term potential to reposition ESPN as a direct-to-consumer sports service. These drivers are expected to counterbalance ongoing structural headwinds in linear television.

Shift Away From Legacy TV Earnings Dependence

Benchmark’s initiation framed a broader change in how investors are viewing Disney’s earnings mix. The firm noted that the company’s results are becoming less dependent on its traditional television segment, with greater attention now on higher-margin areas and scalable digital initiatives.

Analysts are increasingly focused on:

The higher-margin Experiences segment as the core earnings contributor
Improving economics in streaming as monetization efforts advance
The potential for ESPN’s direct-to-consumer strategy to unlock additional value over time

Experiences Segment Emerges as Earnings Anchor

Benchmark described Disney’s Experiences segment as the foundation of the company’s earnings profile. The unit has been responsible for roughly 57% of segment operating income while making up less than 40% of total revenue, underscoring its profitability.

The brokerage expects that expansion initiatives will support multi-year earnings momentum. It pointed to plans to grow the cruise ship fleet from eight vessels to 13 by 2031, coupled with new attractions and international expansion opportunities, as key contributors to this tailwind.

Business Area	Key Metrics / Outlook
Experiences segment	Approx. 57% of segment operating income, less than 40% of revenue
Cruise operations	Planned expansion from 8 ships to 13 by 2031
Streaming (direct-to-consumer)	From nearly $4 billion operating loss three years ago to about $1.3 billion expected operating income in fiscal 2025

Streaming Focus Turns to Monetization

Benchmark highlighted a strategic pivot in Disney’s direct-to-consumer operations. The business has moved from an emphasis on sheer subscriber growth toward a model centered on monetization improvement.

The firm cited several levers Disney is using to enhance streaming profitability, including:

Driving higher user engagement
Growing advertising revenue within streaming platforms
Adjusting pricing strategies
Reducing churn

As a result of these efforts, the brokerage noted that the streaming business has transitioned from nearly a $4 billion operating loss three years ago to an anticipated approximately $1.3 billion in operating income in fiscal 2025.

ESPN Seen as Major Upside – and Key Risk

Benchmark characterized ESPN as both Disney’s most significant opportunity and its greatest execution risk. The firm said that the rollout of ESPN Unlimited, deeper integration with NFL content, and the development of a broader streaming bundle could collectively reposition ESPN as a leading direct-to-consumer sports platform.

At the same time, the brokerage underscored important challenges, including rising costs for sports rights and pressure from declining affiliate revenue in the traditional distribution model.

Multi-Year Catalysts Identified

Looking ahead, Benchmark outlined several potential catalysts it expects could support Disney’s earnings trajectory and capital return profile over the coming years. These include: