Wells Fargo sees assets and execution as rerating drivers for Disney

Investing.com -- Wells Fargo resumed coverage of Walt Disney with an Overweight rating and a $159 price target in a note on Monday, saying the company’s assets and operational execution position it for earnings growth and valuation upside.

“We think Disney’s assets are growing and maturing, creating more predictability in EPS upside that will engender a rerating,” Wells Fargo said.

The bank expects “solid execution and a near-term conclusion on succession,” which it called “the final critical item for long-term investors on the sidelines.”

Wells Fargo described Disney as “an Experiences stock with a Media heart” and said it is “most bullish on Experiences,” expecting the segment to represent 55% of operating income by fiscal 2027.

The analysts estimated Experiences operating income growth of 8.4%, 11.9% and 8.8% for fiscal 2025, 2026 and 2027, respectively, “with FY26 ahead of current guidance.”

On the company’s cruise business, Wells Fargo forecast capacity to grow 2.3 times by fiscal 2032, adding that the unit “should be ~9% of Disney’s operating income” by the end of the decade.

The firm valued the Disney Cruise Line at $37 billion, “based on the fully built fleet at 15x EV/OI.”

The analysts see ESPN as “increasingly de-risked,” projecting 32 million streaming subscribers by fiscal 2030, while Disney’s direct-to-consumer business should deliver “~40% incremental margins” through pricing and bundling.

At 13 times 2027 estimated EBITDA and 20 times P/E, Wells Fargo said Disney’s valuation “is undemanding” relative to its projected 14% earnings CAGR, with “execution as the rerating catalyst.”

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