Disney lifted to Buy at Seaport on better macroeconomic environment

Investing.com -- Seaport Research upgraded Walt Disney (NYSE: NYSE:DIS ) to a Buy rating, setting a price target of $108 on the stock in a note Monday.

The upgrade marks a shift in their outlook for Disney, with Seaport analysts citing improved macroeconomic conditions and emerging profitability in Disney's direct-to-consumer (DTC) business.

Seaport analysts admitted to underestimating Disney's potential earlier in the year, stating, "This is a mea culpa on our outlook for DIS now that there are better macroeconomic underpinnings to the story."

The analysts had previously downgraded Disney in the summer, following market declines and concerns about flat park attendance and operating income declines.

They also noted that increased spending on tech and platforms for the DTC segment had led them to lower their fiscal 2025 profitability estimates.

However, Seaport has now changed its stance, pointing to a better-than-expected economic outlook.

"We are now upgrading DIS shares on the better macroeconomic outlook going forward (better than a soft landing)," the analysts wrote.

They also highlighted the market's acceptance of Disney's current park demand and the potential for further DTC growth.

While acknowledging that Disney's Parks segment has shown "tangibly soft" data, Seaport believes this is a temporary issue. Additionally, the firm sees potential for further revenue growth from Disney's DTC segment, supported by recent price increases and the introduction of paid sharing, which could boost average revenue per user (ARPU) and subscriber growth.

Seaport's revised outlook reflects optimism for Disney's ability to build on its current base of demand and profitability in both Parks and DTC, leading to the upgraded rating and the new price target of $108.

Source: Investing.com