AI stocks have been in the spotlight in 2025. With investors focusing on the technology sector, there are stocks trading at attractive valuations from industries or sectors that have been relatively overlooked.
From the movie and entertainment industry, Walt Disney Company (DIS) is one stock worth paying attention to. Recently, Wells Fargo resumed coverage on Disney stock with an “overweight” rating and a $159 price target. This means a potential upside of 41% from current levels.
Wells Fargo believes personalization efforts will benefit growth at Disney parks, driven by cruises. There will likely be sustained growth in per capita spending at theme parks. Furthermore, stabilizing ESPN through digital expansion will support margin expansion and value creation.
The Walt Disney Company is a juggernaut in the entertainment sector with parks and resorts in the Americas, Europe, and Asia-Pacific.
The company operates within three main business sectors including entertainment, sports and experiences. For the first nine months of fiscal 2025, Walt Disney reported revenue of $72 billion, which is 5% higher year over year. In the same period, the company’s operating income reached $14 billion, which was 18% higher year-over-year.
From a share price perspective, DIS stock is up 22% in the past six months. However, with an eye on sustainable growth, the forward P/E ratio of 17.3 does not suggest extended valuations even after a strong rally.
For the third quarter of 2025, Disney posted higher earnings with EPS increasing 16% year-over-year. From an operating income perspective, the expertise sector was the main driver, contributing 54% of the total operating income for this period.
It’s also worth noting that Disney reported operating and free cash flow of $13.6 billion and $7.5 billion, respectively, for the first nine months of the year.
As the company invests in complex expansions, strong free cash flows will support capital expenditures and provide upside cash flow visibility over the long term. The company plans to invest more than $30 billion in its theme parks in Florida and California to enhance the offerings. Furthermore, an agreement was signed to establish Disneyland Abu Dhabi through a partnership with Miral Group.
Among other positives, Disney+ and Hulu subscriptions increased by 2.6 million quarter-over-quarter to 183 million. The company expects a further increase in the number of subscribers in the fourth quarter. At the same time, a steady increase in revenue per subscriber will likely translate into growth and margin expansion.
In terms of risks, global macroeconomic headwinds could impact growth. However, with expansionary monetary policies globally, GDP growth is likely to accelerate in the coming quarters.
DIS stock has a “Strong Buy” rating, with 20 analysts recommending a “Strong Buy” for the stock. Furthermore, two analysts view the stock as a ‘Moderate Buy’, and six have assigned a ‘Hold’ rating.
Overall, the average price target of $136.4 suggests 21.2% upside potential from current levels of $112.5. It is also worth noting that the most bullish price target is $160, which implies an upside potential of 42.2%.
This bullish outlook supports the company’s growth estimates. For fiscal 2025, the company increased its adjusted EPS guidance to $5.75.
Furthermore, management reaffirmed guidance for double-digit earnings growth in fiscal years 2026 and 2027. This is likely to take into account investment in theme parks, rising revenues from international markets, and the integration of streaming platforms.
On the date of publication, Faisal Humayun Khan had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. This article was originally published on parchart.com
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